The principal issue is Water Damage. Your own statement affirms the possibility the assessment was correct via "a few rain drops" which is water damage. If you had it in a waterproof case or holster the water may not have gotten in to register the dot to change color. I believe steam from a hot kitchen, bathroom car can do the same thing.
Its a bummer that the price charged is so high. But water damage is possible.
Of course it is a design flaw. That is why I have a Casio Commando. My first smartphone was a Verizon blackberry and it was the worst for water damage...it got a foggy screen after being through a rainstorm inside a water resistant bicycle handlebar bag. No phone should suffer damage from casual contact with water, folks. People are 70% water after all. You could put some of these in your pocket, go jogging, and ruin the phone...sort of defeats the purpose of the phone don't you think?
Good to see that Verizon was so reasonable about repairing it, don't you think?