I've got a "sayco" 3 handle tub faucet system. Middle handle directs water to the tub or the shower. When I turn on the shower, it leaks a significant amount of water down into the tub still. What gives? I tried replacing the stem, same issue.
As best as I can tell, what was happening is that my shower head was getting clogged.
So this was causing a lot of pressure to build up within the diverter and the shower head.
After awhile, it would blow. So replacing the stem didn't fix the problem.
What would happen is that it would push the little free inner part (with the holes for water to pass through) off of its small hidden retaining washer. It's supposed to always stay on there(?) After that point the stem is "compromised" and will leak until you push it back onto the washer. But if you do that without fixing the pressure problem, it will just happen again.
But the real fix is to also clear the clog in the shower head. In my case I unscrewed it, checked for any debris in the entrance to the shower head (there was a piece of rubber), and also ran a pin through all the little exit holes to clear them of hard water deposits. Then fixed the diverter so it was over its o-ring. Reinstalled it. Seems to work like it should now.
Other things that might happen: it might be missing an O-ring (a different one): https://terrylove.com/forums/index.php?threads/sayco-diverter-problem.30813/ https://www.ridgidforum.com/forum/mechanical-trades/ask-the-plumbing-experts/30397-three-handle-shower-diverter-questions