Does MacBook Pro M2 top case water damage repair fall under AppleCare+ ?

If only the Key Cap and/or Scissor mechanism are damaged, then it is possible for Apple to replace just the Scissor and/or Key Cap although it will require them to purchase an entire scissor kit and/or key cap kit which contains the pieces to rebuild every key on the laptop so the parts may cost $100US and labor would be extra (you would not want to claim AC+ for the key cap if that is all that is damaged in the base of the laptop).

For some reason every person who has just a key cap/scissor issue seems to report Apple or an AASP will not suggest such a fix & instead opt for the more expensive full Top Case Assembly replacement. However, I suspect there is likely liquid damage to the Keyboard since it is hard to have liquid damage to the Display Assembly & not have it elsewhere.

Apple can charge for one component such as your Display Assembly which is damaged, and replace some other component which is not considered accidental damage under warranty for free. However, only the Apple tech can correctly assess which parts are accidental damage and which may be covered for free under the warranty. It is not always easy to assess.

Take @Grant's advice and also ask about replacing the missing Key Cap separately since Apple does have a Key Cap kit available to AASPs. See what they have to say. Maybe there is more damage than they implied. Regardless Apple always has the final say on what is or is not covered. If you feel it is not right, then you can contact Apple corporate to report the issue or you can seek legal counsel to see what legal options you may have in your region.

Good luck.

The store manager of an Apple-owned Store has a substantial amount of latitude into what can be done for you.

That is the person you should talk to next.