Apple - Returning iPhone (dropped)?

Does apple care if you're honest or not? I know they don't have a damage policy other than normal wear and tear, my power button stopped working. Now I know I always get asked if I dropped it, and I have told them no before. Will they not give you a new phone if you tell them you DID drop it? I hate lying and don't want to do it again.

I'm a believer of honesty is the best policy but if the truth is unrelated to the situation then they don't need to know that.

So if the power button stopped working but it is unrelated to it being dropped (say it was dropped awhile ago and only now stopped working) then you can honestly tell them "No, the failed button is not due to it being dropped."

They will know if stuff is broke inside it, unless it was just likely dropped where no damage was done. Whether you are honest or not in that case I don't think it matters since you dropping it is your problem, regardless of how you look at it.