Answer:
Please, if you find out why this is happening, let me know. We have 2 bay trees from our Wedding in 2007. One is thriving, the other is exactly as you described yours. If it's any consolation I don't think it has anything to do with the watering. We live in Scotalnd, trust me, water is never an issue!!
It is possible the death of the tree is the same as we are experiencing in Florida. The trees are dying at an alarming rate due to an incurable fungus spread by an Asian Beetle.