(1) I've heard that some state government agencies have "no upgrade" policies in place...CA, in particular, seems to be pretty bad about this. It's about a frugal image. I suspect some exceptions might pop up if health concerns and/or disability issues come into the mix, but otherwise it is apparently a painfully hard policy.
(1a) I suspect that if you won the "broken seat" lottery, most "hard no-upgrade" agencies and companies would swallow it...those are rare enough that I think most of them would at least give you a pass on it once. A picture of the broken seat would probably help.
(2) In cases where there's a "hard" preferred vendor policy (e.g. "Thou shalt use this airline even if you have to fly into a different city and drive three hours when you could have gotten a cheaper flight overall into a close-by airport on another airline) as opposed to a softer one (e.g. "Use the preferred airline if you can, but if they don't fly there or there's a price difference of more than $X/X%, feel free to take the other option"), it seems like it would be a good idea for the company in question to give at least some sense of why the policy is that firm (arguably, in both directions: Down the chain so they don't get stuck playing "Whack-a-mole" with employees trying to save the company money and potentially "shooting" a good deal in the foot, and up the chain so it doesn't turn out that the travel office is manipulating the partnerships in question to get free travel).
Incidentally, the late AlanB once told me about how he got a long-term client to sign off on letting him take the Metroliner in First on a regular basis after he discovered that as a DC-NYC travel option (this was back in the 90s and the client basically didn't "get" the idea of taking a train):
His contract stipulated that travel time was to be paid for, but that hadn't generally been enforced too hard. If they wanted him in Coach on a flight, they could pay for the three hours of "airport time" generally required (plus the airline ticket that, IIRC, was more expensive than the Amtrak ticket)...or they could accept the Metroliner fare and not worry about travel time.