This is outrageous.. and I hope you will continue the legal fight. There is a fundamental principle at stake here. You took all reasonable precautions to ensure that you did not check in valuables and that the bag with these essential items remained with you at all times. This is in accordance with their advice. Do not put valuables in checked in luggage nor medications. The airline took control away from you, without your consent, and failed to meet their legal obligation to protect your property. I would say that in these unique circumstances you would have a very good chance of winning eventually. You should also try to get some TV publicity for this.... there is nothing you could have done and Continental have been unreasonable.
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