That's definitely a "line out" error. It's a hardware fault in the display, not a crack of the screen. iRex says it's similar to what happens with an LCD screen where sometimes a line of pixels will stop responding. I'm not sure if it's the controller, or something else in the screen, but hopefully it won't get worse over time. Basically the eInk layer is "printed" onto a circuity layer that lays the screen out into rows/colums of pixels that can be controlled with voltages. The display controller then tells the screen how/when to use those voltages to activate the eInk material. What's happened to your screen is a line of those "pixels" has stopped working.
As far as getting iRex to repair it out of warranty, you can try and ask them, but I wouldn't get my hopes up. Usually a repair/replacement of the screen is going to be really expensive.
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