Dubbs...; My gut feel is that the frame is toast but there are a dozen previous threads searchable on this forum which detail that there is no way to tell 'fer sur' except to remove the paint and examine it closely. Good luck with the warrantee... I'll note that my local shop stated clearly that if it was a Specialized bike/frame sold new by an authorized dealer it would be covered no questions asked.

As to the cause, I would put my money on the cause as someone riding the bike very hard with the seat post extended too far out of the frame. When a frame has the seat tube that goes well above the top tube like in your pix, you want to ignore the "minimum insertion line" on the seat post as those are based on classic road bike frames where the seat tube does not extend up so high. Keep the seat post in at least another half inch deeper past the minimum line. Note that extra long seat posts are ease to find on Amazon or ebay starting at the $10 range. I swear by them!

Hope that helps
/K