I had rust warranty done on my car. My fenders had rust bubbles and they were way smaller then yours, but it was covered. In total i had both my front fenders replaced due to rust. If I were you I would go to another dealership because every Audi dealer is different and emphasize that it is bubbling to them. If its bubbling like that it should be covered. Plus once you get that spot repaired by another shop your 12 year rust warranty is void on that area of your car.