Smart Cover on/off no longer functioning
Go to "Settings" and then "General" and verify that the "iPad Cover Lock / Unlock" feature is turned on. If this feature is enabled and the issue still persists I would suggest you test out your iPad with a different smart to verify the issue isn't with the iPad itself.

Is your smart cover an Apple branded smart cover or third party? I only ask because Apple would not decline you replacement support unless the smart cover is question is not their product.