Lots of great responses.

I never mentioned anywhere that I was in an argument with the check-in attendant, that was just implied. In fact, the entire interaction was very cordial - as in virtually all situations that gets you farther than starting with an attitude. When check-in agent had mentioned the bag was overweight - I simply laid out exactly what I stated above. She then disappeared behind check-in and did not emerge for roughly 20 minutes. When she did, she came out with the supervisor, and an additional red-coat, and they were interested in collecting some additional details, which we provided. To me, it honestly just felt like a lack of direction on what procedure to follow through with all parts of the staff, including the supervisor, and thats why one of my first questions was whether or not these agents had authority to waive fees like that or not. With all that said though - they were still very apologetic and sent me off with whatever details needed to escalate my complaint later. I do however agree though that there should either be a definitive outline on whether or not to waive a fee like that as this is what puzzled me more than the $200 charge.

MSP brings up a great point and a detail that the check-in agent did ask - but in fact TSA did not search those bags / no card inside.

The other great point brought up is whom the bags were checked under. In this situation as well, I believe it was my SO, as typically the only time i am ever visiting a check in counter is when I am traveling with SO as she usually requires a boarding pass and is the one checking the bags. I avoid them at all costs to minimize downtime when on my own. So its very possible check-in agent at LGA had no idea of status.

The bag was indeed a hard-sided two wheel luggage that was carrying mostly make-up, shampoo, other bath products that probably accounted for 20-25 pounds properly packaged within zip locks. We are on roughly 20 or so flights per year together where the packing habits and luggage were the exact same situation and we have never had an issue. Coincidence that the first time this happened there was a baggage claim involved? Maybe, maybe not, thats why I am here sifting through opinions. Damaged in transport from baggage claim to hotel is unfortunately out as well as it was a small piece of luggage that was sitting on the floor of the vehicle cabin once in my possession.

Coincidence or not I think I found my biggest fault in that I should have either picked up the phone or had someone do it for me immediately upon finding the damage and reporting it to Delta.