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Half black screen

I have a Droid 2. I am a year and half into my contract. About a year ago I dropped my phone in a puddle. It was fine afterwards... The other day the screen went half black, and sometimes twiddles between an array of shades, once in a while it will let me see what is on the bottom half of the screen but not always. It started out as a line that flickered across the screen and broke into this half page nonsense. I took it to Verizon they said the warranty was void due to the puddle, and that sometimes the damage takes a long time to set in from water damage... But a year is that possible? They offered me the $100 replacement from insurance or upgrading now.. A friend told me there might be a glitch with the phone...I have tried restarting the phone, leaving it shut down for a while, decreasing some of the apps, pics, n music... to no avail. I am going to try and reset back to the factory settings. IF anyone can help please reply... Thank you