Most xDrive owners will never service the transfer case fluids as there is nothing mentioned anywhere in the maintenance manual about it. Also, unless your dealer is diligent and hook up an OBD reader during normal maintenance, you will never know whether the fluid needs changing or not as there are no other reminder for it.
The drive shaft "teeth" connecting to the transfer case is the most common failure, at least for the X5. I'm wondering what "gearing" your dealer is referring to as the xDrive transfer case is mainly composed of a clutch pack and chain inside.
Glad to see that everything was covered under CPO