This would aggravate me. Etiquette going out the window in modern life is one thing, but this is therapy. Her focus should be on you, the client, and there's no way she should be fiddling with her phone, in my opinion. If it was an unconscious thing, well.. but there seems to be an easy fix in putting it out of reach. The thing is that you've told her it bothers you, which she should take seriously, but she seems unwilling to be in the 'wrong' about it. If she's not going to look at her own behaviour in this instance (something that seems pretty clear cut), it would raise a red flag for me - how will she handle any potential ruptures and more complex issues further down the line? It's not good to be in a position where you're always questioning/blaming yourself because your therapist doesn't like to take any responsibility and instead is all too happy to turn things around on you.

I'd be tempted to ask her how appropriate her supervisor (if she has one) thinks it is, and urge her to get outside opinions. I wouldn't be having it that this was my issue!