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Apple settles iPhone water damage lawsuit for $53M

Class-action lawsuit claimed that owners of the early versions of the iPhone and iPod Touch were unfairly denied warranty coverage.

Apple has agreed to pay $53 million to settle a class-action lawsuit related to warranties covering early versions of the iPhone and iPod Touch.

The lawsuit, originally filed in 2010, claimed Apple had unfairly denied warranty coverage to some customers under an Apple policy associated with devices affected by water damage. The settlement, which still requires the court's approval, will be held in a fund to be distributed among the 153,000 members of the class-action suit, according to documents filed in the U.S. District Court for the Northern District of California and reviewed by The Wall Street Journal.

Thousands of owners of the original iPhone, iPhone 3G, iPhone 3GS, or the first three generations of the iPod Touch who unsuccessfully haggled with Apple to get their defective device replaced or repaired under warranty can expect payouts of around $200, depending on how many people submit claims, according to Wired, which first reported on the settlement earlier this month.

For these devices, Apple had one-year standard and two-year extended warranties, but in many cases the company claimed it was the users who damaged their iPhones and iPod Touches. If an indicator placed inside the device changed from white to pink or red, it proved there was water damage.

Court documents indicate that Apple had a "liquid damage policy" that allowed Apple to deny warranty coverage if the liquid indicator changed color. However, 3M, which made the indicators, later said that heat could also cause color change.

CNET has contacted Apple for comment and will update this report when we learn more.

The proposed settlement comes on the heels of warranty criticism in China, where Apple was accused of repairing only broken or otherwise faulty parts within its products for customers in China, versus providing new replacements in other countries. The flap led a revision in Apple's warranty policy and an apology from Apple CEO Tim Cook.