I had a very similar experience. Total screen crazed with screen lifting off while wearing a series 3 on my wrist.
No impacts experience, the watch was on my wrist under my sleeve. It looks different to the typical impact images shown about the net as in my case the whole screen is crazed. My only explaination is that I hade recently gone from a cold environment to a hot one and perhaps some thermal stress fracturing had occured. The battery was not obviously swollen although it did look missaligned.
I took it to my nearest Genius bar who referred me to a manager who said it had been impacted as evidenced by the shattered glass. I asked if I would have felt such an impact sufficient to destroy the face, he said yes, which essentially meant he was calling me a liar... the conversation was not able to progress from there.
I have Apple Care so the cost of replacement would be quite reasonable. However, if I accept AppleCare it seems I am required to sign-off that the issue was my fault. This seems to me to be disengenous and will prevent it from getting Apples QC attention. I have therefore elected to purchase a new Apple watch (which has the advantage of having the device back immediately as it is a really useful tool). I am also now able to fight the case through consumer affairs which I am now doing. Hopefully someone at Apple will take note and they will start to recognise this is actually happening.
Here is a picture of what I saw as I rolled up my sleeve.
... Note the watch still works.