Interstate National Dealer Services, Inc Claim denied

I purchased the extended warranty 3 years ago when I bought my used 2008 Jeep Rubicon Unlimited. 3 weeks ago I took my Jeep to the dealership for coolant and oil consumtion. The warranty covered a new radiator, engine pan and valve cover gaskets. While during the dealerships inspection the notice a noise in the front differental.

They removed the cover and a shim and washer had come lose. The warranty companies inspector came out and determined that the diffferental needed a total rebuild ($5,100.00) and that it was covered under warranty. The claim was sent to the head office and the claim was denied.

The reasoning was that I had just installed one size bigger tires. They claim that the vehicle was modified. The new tires didn't modify the drivetrain or suspension. My Jeep mechanic told me that the denied claim was illegal. Please help