Apple to pay $53 million to settle iPhone, iPod touch warranty suit

Apple has agreed to pay $53 million to settle a class-action suit in connection with warranties for its iPhone and iPod touch devices.

The proceeds of the cash settlement will be paid to over 153,000 owners of the devices who were denied warranty coverage while Apple’s “liquid damage policy” was still in force, according to a joint filing Tuesday in U.S. District Court for the Northern District of California.

Under the earlier warranty policy, Apple had installed a Liquid Submersion Indicator (LSI), made from a water contact indicator tape manufactured by 3M, on the devices. Color changes in the indicator from white to pink or red could be viewed externally.

Apple changed its Liquid Damage Policy for the iPhonearound November 2009; the policy continued for the iPod touch until May 2010.

The company held that a red or pink external LSI was sufficient proof that the device had been damaged by liquid, hence making the warranty void in line with provisions that excluded coverage, for example, for “liquid spill or submersion” or “abuse.”

The plaintiffs contended that the change of color on the LSIs merely indicated that device may have been exposed to liquid, but did not establish that it was damaged by exposure to liquid or that the exposure caused the specific malfunction in the device the customer was seeking to repair or replace under warranty.

3M’s testing and product instructions also stated that pink was merely an indication of humidity, and did not indicate contact with the liquid, according to the plaintiffs. Apple contested 3M’s results stating that the tests were conducted on indicator tape open to the elements, and not contained inside a device, and at unrealistic extremes of temperature and humidity.

The settlement still requires the approval of the court. Customers whose warranty claims for iPhones were denied before Dec. 31, 2009 because of the liquid damage policy, and claims for iPod touch that were denied before June 30, 2010 are eligible for settlement funds. Up to 30 percent of the proceeds may be awarded as attorneys’ fees and reimbursement of litigation expenses.