This has happened me... Have bought so many Apple products over the years and this is the first to cause me serious problems.
Spent 5 hours of my only day off last week trying to sort this out. An in store technician told me and reported on the work authorisation form, "Examined device at Genius Bar - there is no signs of customer misuse, no dents or damage to support how the home button could of gotten cracked. MRI diagnostics confirmed home button issues and both the home button and Touch ID could not be picked up." Yet still told me I would have to pay £149 to get the whole thing fixed, she said it was unfair I had to pay and also said she could escalate and arrange a call with Apple Support in regards to seeing what they could do RE: the repair fee.
Few hours pass and after a phone call with Apple Support who were utterly rude (kept cutting me off) and confusion surrounding everything I walked back into the store to see the manager. Never have I received worst customer service in my life - I was made out to be a liar and kept repeating the "obvious sign of a point of impact"... How there could be a point of impact from a phone that I left for 30 mins charging on my bed is mind boggling. A technician spent 30 minutes looking over my phone and operating my phone to then write a detailed report on how the damage was not caused by myself, yet the manager who took literally two seconds to look at my phone overruled that and refused to waive the fee. Told him he would need to sit down with his team to ensure they all get on the same page because one person telling me one thing and an incompetent manager overruling it is horrendous customer service.
Totally pleased with the service I received from the technician when handling my case and she was more than understanding, I even went as far as letting her read this thread on my phone and she herself admitted she didn't like the vulnerability of the home button.
I've since been passed on to Apple Support, specifically in contact with one agent who I can email and call directly, I have uploaded the report made by the technician. I will not give up on this until an acceptable resolution has been found.