You can see from the pic it's from the wear and tear of taking off the band from the magnets forcing together and coming off. Maybe sweat weakened it but you can't expect a person to never sweat with a leather watch strap, but if this was a normal leather strap I don't think I would have an issue, it's the force of the magnets that essentially caused the rip.
If the force of the magnets — which is directed normal to the band surface — themselves caused it, the tear would most likely not run cleanly across the band like it does in your photo. That’s not how force works.
There’s a
huge difference between the amount of liquid that a leather band would encounter through typical daily wear and that which it’d experience through presumably numerous workouts. The sweat caused the band to warp and become discolored and brittle. Eventually some other force, likely while you were fastening or unfastening the band, caused it to tear because the leather had deteriorated to that extent from liquid exposure.
I figure this issue was likely exacerbated by the texture of the band; the "bumps" are deeper than in the similar Leather Loop band from Apple and certainly deeper than a flat leather strap, for example, and this presumably puts more strain on the leather. This issue would have happened eventually regardless of any hypothetical leather band you exercised with, though, because leather is leather, and leather does not go well with water (or sweat).
Ultimately, you should
never wear a leather band in a scenario where it will be exposed to significant amounts of water or sweat, which Apple communicates to you if you read the product description when buying a watch band (and frankly is also common sense). Get a fluoroelastomer, silicone, or nylon band for exercise.
That's not what apple told me, they repeated bands are not covered under warrenty. They didn't even ask about exercising, it was just an immediate reaction like muscle memory for them.
I mean, the damage clearly falls under “accidental damage,” not a manufacturing defect, so regardless of whether watch bands are covered under warranty or not, you’re up a creek. Sorry you had to find out the hard way.