I think thiswoukd be covered under any AppleCare version as this appears to be a manufacturing issue/defect.
If your iPad is still under thefree, one year AppleCare or the paid, extended AppleCare+, this should be covered.
Out of curiosity, was the smart cover one of the silicone ones or was this one of the leather smart covers?
The leather smart covers use an Anilin dye that can come off/bleed off with time.
Good Luck!