Can wireless carriers really terminate AppleCare?

The president of the company where I work here in Japan was telling me today that his previous wireless carrier AU terminated his AppleCare when he changed mobile phone contracts even though he was allowed to keep the iPhone XS issued to him under that wireless contract. That struck me as very odd because I'd never heard anything like that before. He visited an Apple store in the Nagoya area to confirm his iPhone XS's AppleCare was indeed terminated. I was unable to Google anything on this topic, his my post in this forum.

Is it even legal for a wireless carrier to terminate AppleCare when that was part of the contract you had been paying for? From what I understand, AppleCare is a single, one-time payment. If the carrier paid that one time AppleCare fee, it shouldn't be tied to any monthly payment by the contracted customer, I wouldn't think.

The core issue is that he dropped his phone by accident just over 3 months ago while still under the AU contract and while AppleCare was still active. He was then able to pay ¥3000 to get the screen replaced (it cracked when he dropped it). He received the repaired phone back and felt on occasion something was a bit odd, but it was very usable at the time and therefore paid no attention to it. But over time the iPhone stopped responding to touch more and more, and then a week ago it suddenly got worse and has become hardly usable. He contacted Apple at that point, but that was after he changed wireless carriers, and it was then learned his previous carrier, AU, had terminated the AppleCare. As a result, Apple said that the prior repair was just outside the 3 month warranty covering repairs and because his AppleCare had been terminated by AU, he would have to pay ¥30000 (about US$300) to get another screen replacement.

My guess is that the initial repair is directly related to this problem, possibly because the repair technician did not properly secured a cable inside the iPhone, or perhaps a circuit board was cracked too and they didn't replace it when they should have. Either way, my strong suspicion is that the Apple repair a few months ago was not perfect, leading to touch sensitivity almost completely being non-functional now.

Apple ran full diagnostics on the iPhone in-store, but the diagnostics showed nothing wrong. Even so, he demonstrated the problem to Apple staff, who agree it had a problem. It was at that point they quoted him the rather high fee for screen replacement.

Once again, I am really confounded that wireless carriers would have the legal right to terminate AppleCare. I'm curious if that is a Japan-only thing or if it happens outside Japan too. I'd also love to hear thoughts on what action should be taken at this point. He hasn't paid the ¥30000 fee yet because it's an iPhone XS and too old, in his opinion, to be worth that repair price. At that same time, he really isn't interested in changing his phone to a new one.

Had AppleCare not be suddenly terminated by the wireless carrier, his AppleCare still would be valid today, and his only fee would be ¥3000 (about $30), which is more than acceptable.

I look forward to hearing your thoughts.

Thank you.