Conditions for Setting the DTC
WARNING: This page is about a different car, the 2004 GMC Sierra and 2004 Chevrolet Silverado. However, it is still accessible from the selected car via links, so may be relevant.
The transfer case shift control module has a predefined range, 0.5-4.5 volts, in which the encoder feed back should stay within. The DTC sets if the encoder signal feed back falls out of this range.