Did YOU read the warranty? Do YOU have a legal basis for disagreeing with their 'decision'?
I'd object on the grounds that this failed under the regular 4 year 'defect' warranty and NOT under the 'rust warranty'. It isnt rust. It is a mfg defect- they failed to fully coat the metal, there was some porosity, the metal has corroded.
Who gives an F, its a rental. Is it worth the hassle for you? I'd write a demand letter to BMW, citing the warranty language and the law- but prolly take it no further.
Keep it as simple as possible...but no simpler.