Trans-Xfer case leak

I had the transmission replaced on my 1997 K-1500 Suburban (haven't we all) by the local dealership. The transmission is well within time and mileage warranty. I have developed a leak between the trans and transfer case. The dealership says its going to cost $500 to replace the seal as this is not covered under the warranty.
Is replacement of this seal done during a trans R&R as I'm sure they must take off the transfer case. It seems to be a warranty issue.

Thanks Kasey

Ask them to explain exactly why it is not covered. If they cannot come up with a reasonable explaination then ask to speak to the service manager. If he does not satisfy you the ask to speak with his boss. Make sure not to get to aggitated with them I know it is hard but I have learned it does no good at all to yell and scream. If they still do not warranty their work then as a last resort threaten them with leagle action. Good luck let us know how it turns out. I get tired of stealerships pulling the wool over peoples eyes.