I would guess it means in resalable condition, or able to be refurbished. If the rear case is cracked, but is a replaceable part, it should be acceptable to the program. All you can do is try!
See other post in this thread.
Found the reference I was seeking. This page provides the conditions. It appears you would need to use the extended warranty to effect a repair to the device before submitting it to the T-up upgrade program.
NFtoBC If you find a post useful, please give the author a "Like"