question about warranty

Awhile ago my car started acting weird and then finally a check engine light came on. I took it to my mechanic and he said I need to replace an o2 sensor but I was also getting a misfire code in my first cylinder and he would check it out. He did a compression test and told me my rod in cyl #1 is probably bent but to take it to toyota since the car is under warranty. Long story short the rod was bent and the service manager told me he would cover it if there was no sign of nitrous. I asked him if the part was covered otherwise and he said yes. He called me later that afternoon and said the warranty people won't cover it because I probably went through a puddle. I asked him if there was any evidence of the engine sucking in water and he said no. Then he told me to call my insurance cuz they will cover it but I have to tell them I went through a puddle. I ended up paying $2300 to my mechanic to replace my #1 cyl rod and #2 because it started to bend now too. My question is has anyone dealt with something like this and is there anyway I can sue to get them to pay for the work cuz they didn't want to honor the warranty. Any help would be greatly appreciated. By the way I have a sri and it sits basically on top as you all know so I don't see how I got water in through there.