All of Apple's mobile products, including iPhones, iPads, iPods, and MacBooks, contain one or more LSIs (Liquid Submersion Indicators) or LCIs (Liquid Contact Indicator) that turn from white (or silver) to a pinkish red when they come in contact with a liquid.
These sensors are primarily employed by Apple to make it easier for its Apple Store and/or third-party repair technicians to determine whether a device has failed as a result of liquid damage, which isn't covered under the company's standard warranty.
This essentially means that the LCIs will trip when the device contacts water and tip off Genius Bar employees at the Apple Store of when the customer might have dropped the phone in the toilet or exposed it to rain. And when those sensors are tripped, at least until recently, Apple employees were told to dismiss any warranty claims. You could get your device fixed, but it would cost you.
The woman bringing the lawsuit, ended up buying three different iPhones (at a discount) because the first two iPhone 3Gs she owned broke about six months after purchasing them. Both times, she was told the sensors in the phone had indicated they had been exposed to a significant amount of water. In her lawsuit, she and other complainants claimed Apple knew the sensors were at least overly sensitive and possibly defective.
Over the years, however, Apple has been on the receiving end of much criticism over the sensors, which have a tendency to indicate false positives, especially in regions with humid climates and at other times when the devices haven't actually been met with direct contact from a liquid source.
Owners of iPhones might have run up against Apple’s (AAPL) warranty policy as it relates to water damage -- which is, there is no warranty for water damage.
This was enough to create a class-action lawsuit situation in 2010, when iPhone owners banded together to claim that the LCIs were not always accurate. Users were finding that more than just liquid would trigger the LCIs -- things like sweaty palms, humidity or even cold were allegedly enough to trip the sensors. Then, when people who were otherwise taking good care of their devices would come with a warranty claim, they would be shown the door because the LCIs were tripped.
Since then Apple seems to have relaxed its repair policy on iPods whose internal sensors indicate possible water damage by authorizing its service providers to make repairs to the device under warranty in some cases.
A new ‘repair memo’ indicated that Apple is making changes to the iPod water sensor policy. The new policy states that if the customer disputes whether the sensor has been set off, Apple will look for external corrosion damage.
The document appears to be a guide for Apple Store employees on what to do with iPhones that have the LCI’s triggered. Rather than just look at the indicator and void the warranty, the document basically recommends the employees be a little more thorough with their assessment: they should look for clear signs of water damage, like liquid behind the display, and corrosion. The best part is this: “If a customer disputes whether an iPod with an activated LCI has been damaged by liquid contact and there are no external signs of damage from corrosion, then the iPod may still be eligible for warranty service.”
It should be noted that while the document in question does not rule out similar guidelines for iPads and iPhones, it was authored specifically to address LSIs within iPods and its therefore unclear whether the policy translates to Apple's other iOS devices being denied repair under warranty.
It’s tough to tell if this is really the new Apple policy without risking an iPhone, but at least it bodes well for customer service for iPhone owners if the document is the real deal.