They might have made a mistake but they are unlikely to have made it up deliberately to avoid making the repair.
LG Electronics are the world's #3 phone manufacturer. Carphone Warehouse are Europe's largest phone retailer and have the biggest repair facility for phones in the UK. They are also FTSE top 100 listed.
Yellow pages might help you find someone independant but you'll have to pay them for an opinion.
Warranty repairs are big burdens for mobile phone manufacturers - typically 10% of all units sold - and they try very hard to keep the costs down. Water damage is very common - they know how to recognise it.
Peccavi
April 2009