Also "13.1 Apps that encourage users to use an Apple Device in a way that may cause damage to the device will be rejected"
Although, what you said about warranties makes sense...however honestly that hasn't kept friends of mine from deliberately breaking their phones just to get new ones.
Did you criticize them when you found out they did that?
As for myself, my iPhone 4 is half-broken and I'm still eeking out whatever life I can get from it before I get the iPhone 6 in the Fall.
The reason is that Apple has a very generous straight replacement policy (at a fraction of the retail new price) even if you don't subscribe to any of their care plans. This is a world different from makers like HTC and Samsung who fully intend to double dip if you have an issue with your device, where a replacement of a broken device costs 100% of its original price (meaning you are paying again for marketing, R&D, profit, markup, etc). I have faced exactly this twice (both with Samsung), once where they claimed nebulous, unproven corrosion damage on a device that had never touched water, and had all clear water sensors. As a user there is nothing I can do to contest this, their warranty being effectively useless through no negligence of mine. They nicely offered to fix it for just over a thousand dollars.
Samsung and HTC and others want you to bust your device. Apple doesn't, because they have a stake in it as well, making no profit from your own misadventure.
I cannot overstate how helpful and efficient the staff were and the process was just so quick and simple. If (mildly idiotic) apps like this being banned are the price of that piece of mind? I pay it gladly.
As for the app itself, cool! I'm glad somebody had the audacity to ship something as outrageous as this. I don't think it will get much of a following, but I suppose if you really don't care about your phone or you're really confident in catching this could be a cool, reckless waste of 10 minutes.
EDIT: For clarification, I don't really side with or against Apple in general on things, so this isn't meant to be a "Apple's always a walled garden, BAH" post, etc...I just really feel any company should let users feel free to destroy hardware. But I understand that might not be the best philosophy to run a multinational company.
EDIT2: Just thought of a way to game this after reading another comment - slap on a Lifeproof case, go in a big pool shallow enough to stand, throw it really high. Eliminates the need to catch it (within...reason...).