My automatic transmission needs a complete reconditioning. The gear box was dismantled at a specialist transmission place and they reported that the fluid was black, burnt, smelly & low.

A full exam showed the direct clutch had failed due to loss of hydraulic pressue through the direct clutch teflon sealing rings. The warranty company sent their own inspectors to write a report and this says there was no mechanical failure and it was expected wear & tear on a vehicle of this age - enabling the warranty company to get out of paying for any repairs.

But this second report did say they were unable to examine the fluid as it had already been drained. Did the fact that the fluid was black & smelly and at a low level make any difference?

Did this cause the subsequent damage to the transmission? Or would general wear and tear on the transmission cause the fluid to degenerate? How long does it take for fluid to get like this and damage the transmission?