Iphone 4 may be damaged and can't be activated for service?

My sister dropped her iphone 4 in the bath but took it out quickly and dried it out. It turns on and goes through the first bit of setup then says i need to connect it to itunes. When i do i get this message:
There's a problem with your iPhone.
The iPhone you connected may be damaged and can't be activated for service. We recommend you visit your nearest Apple Store for more information.
is there anyway to fix this without going to apple? Because it's no longer on contract i doubt they will replace it or fix it for free

Added (1). I meant her insurance doesn't cover it anymore, she got a new phone already she jt want this one fixed so her boyfriend can have it. It's been completely dried out already it's been over a month since she dropped it.

Added (2). Also I already mentioned it turns on and says connect to iTunes where I get the message that I need to take it to te apple shop, I was asking if there's and alternative to taking it there

Well you caused water damage, of course they won't fix it for free because its complete negligence on your part. Let it completely dry out for days and then hope that you didn't ruin it. If you are not on contract then I would just get a new 2 year contract as you can get a new iphone 4 free as a replacement.

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