Weird grinding/rubbing sound from left front wheel area

I own a 2014 Prius with 97,130 miles and am experiencing a rubbing/scratching/grinding noise from the left front wheel area.

The sound also appears in neutral and isn't affected by application of brakes.

Here is another video, the bugs drown-out the noise.

I assumed the problem was a brake issue (sounds like one) and took the car to Firestone. The ASE certified Firestone mechanic said the brakes and bearing are fine and was unable to determine the source of the noise. He said the Toyota dealer should quickly be able to locate the problem if it's something that they have seen in the past.

I bought the "Advantage Preferred" extended warranty and have receipts showing proof of having the vehicle maintained as recommended by the manufacturer. However if the problem is something complicated with the transaxle, there is a 100% chance the dealer will collude with the Administrator of the warranty to find micro-asterisk* clause loop-hole they will use to deny the claim..

I am hoping this is something cheap fast and easy.. I just don't know what to expect.

Does anybody have any experience with this noise??

 

The sound is present when the vehicle starts forward and rearward motion. At idle, there isn't any noise. I'm taking the car to the dealer tomorrow morning, and hoping it is something like a foreign object rubbing on something. The brake guy at Firestone was not able to isolate the sound and I'd assume he looked for something out of the ordinary, but you never know.

 

Toyota spent 3 hours trying to locate the sound. Toyota said the sound only happens when pressure is applied to the wheel, but no sound can be found when the car is on a lift. Toyota raised the Prius, drove the car and no sound was found. Toyota removed the wheel and did not see any noticeable defects with the tire.. but the noise persisted.

Finally Toyota removed the tire from rim and noticed the inside sidewall of the tire had separated running 50% along the circumference.

When the tire rotates, the separation opens when the tread mashes and closes when the separation is toward the top of the rotation.

The tire is the Bridgestone Driveguard BL 215/45R17 XL91W. This is the new run flat tire that uses a very stiff sidewall. Firestone replaced the tire (no charge) and will be sending the bad tire to Bridgestone.

Toyota charged $124.95 to diagnose the problem.