We have had dry sump belts break or come off on new engines the first night out.In a case like this where the customer is honest and admits a mistake we would knock 25% or so off the labor to help him out, in fact this just occurred last week.
In the long run you keep a customer and gain more because he will tell his Friends you helped him out when you clearly didn't need to.
If your in this business for the long haul taking care of customers is top priority. any money you loose taking care of the customers will be made back and then some later.
Don't get me wrong,we don't go crazy warrantying engines.example would be if a customer supplied there own parts and there part failed.we tell the customer and note it on the tag that when they supply the parts we only guarantee the machine work was done correct. Bill