I know this is a really old post, but it was at the top of my search results when I google for why Timbuk2 didn't consider a peeling liner to be covered under their warranty. It cost me $27 to ship the bag to them for inspection, and will cost another $25 to get it repaired and returned. I plan to pay it, and to never buy another bag from Timbuk2 again. I prefer to spend my money with companies that take their own warranties seriously.