Will Apple replace an iPhone if it is covered by Apple Care if it is completely ruined?

It isn't free to replace a damage phone under Apple Care. There is a cost.

You should make an appointment at the Genius Bar at your local Apple Store and have them examine the phone and tell you exactly what they can do.

All you can do is take it to Apple and file one of your 2 allowed accidental damage claims (for a fee). They will take things from there.