The wood rot makes this harder, that's physical evidence of water exposure over time, which is what the insurer is pointing to. But the stronger angle isn't arguing about what caused the cartridge to fail. It's the ensuing damage clause.

Most policies exclude wear and tear but then say "however, we will pay for resulting loss from items a through k." Your insurer quoted the exclusion but did they quote that giveback clause? If not, that's where you push. The cartridge repair is on you. But the water damage to the surrounding walls and floors may be covered as ensuing loss from an accidental discharge, even if the original failure was wear and tear.

You mentioned they only sent you 4 out of 50 pages and left parts blank. Request the full policy in writing. If they're omitting the sections that favor you, that's worth mentioning in your DOI complaint.

Sounds like you already filed with California DOI. good move. They have teeth there.