You'll need to take it up with your local apple store manager. As far as I know, the official policy is to exchange accidental damage for a refurbished iPad because accidental damage is not covered under warranty. Unfortunately, it won't matter if it was malfunctioning before the accident happened. Once it's damaged, that damage is presumed to be the cause of any malfunctions.
However, store managers do seem to have some discretion and there have been anecdotal stories of people finding a sympathetic store manager.