Return damaged watch
my Watch was damaged, I have apple care. They sent me a new watch, do I put the damaged watch in the box they sent the new one in and return it. The box was outfitted with an “EZ RETURN” label.
Apple Watch
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Yes thats the way to do it. EZ is short for Easy presumably :)
Check these instructions too. Its important to unpair it, if the watch is in such condition that it allows it. That will automatically create a backup of your watch on your iPhone than you can use when pairing with the new watch.