The OP said that the item has a legitimate issue. He would be paying the deductible. So i guess I don't see what the problem is. He wouldn't have to immerse the phone, all he has to do is be honest and see what can be done.
Asurion only offers upgraded replacements when the original phone is gone. Let's say they're out of OGDroids and send out Droid2s (for a limited time). If they send out 50 Droid2s and those 50 people send in their OGDroids, after "fixing" them, they now have 50 OGDroids to send out and will no longer replace with D2s. As phones get cycled thru, the replacement changes.
What happens is that people post on sites like this "OMG!!! I got a D2 for my D1!!!", so some people find "faults" with their phone in an effort to "upgrade". Some will get the D2, some will get recently returned and refurbed D1s.
If there's an issue, replace it, but don't expect to be moved up to the next device.