This makes me so mad. No way I'm letting that happen.
I had to have a puppy flown to NY a few years ago on delta. When I delived her to the cargo handling area and handed it off to the person taking care of her I told him if anything happens to this dog I coming looking for you personally.
Another thing I thought about, if you comply and put your dog up there (I NEVER would comply with that personally) who doesn't check on your dog in a small space for the whole 3 hour flight?