Tahoe - Encoder Motor

I am wondering if anyone can give me a description of what an Encoder Motor does and how it functions. The reason I ask is that on my 99 Tahoe it recently went out and was replaced. My extended warranty company, Nationwide Auto Dealers Group is saying that my contract does not cover this. They cover all internal parts of the transfer case but the Encoder Motor part is not listed in their description of "what is covered and what is not covered"

I think I have a good case and I want to file an appeal with them. But since I have never heard of an Encoder Motor until now, I want to make sure I can speak knowledgable on it so my appeal is reviewed closely.

Thanks for your help in advance...