My wife went back up there. The local manager said that she did not know why it was taking so long and called the higher up again. Couldn't get her on the phone (which is what happened every other time as well). This time she persisted and finally got someone who said the claim was approved they were just waiting on the fax from the local manager. The manager told her it had been faxed to them last week and she had confirmation. The higher up apparently said, "Oh, that fax machine. We never check that one." They assured the local manager that the check would be in the mail by tomorrow morning and they would call to confirm.
So it sounds like clerical errors were the hold up and nothing more. At least that's the positive spin I'm putting on it now. However, if we had not continued to pester them about it who knows when they'd have found the mistake.
It looks like dueling banjos and litigiousness are on hold for now.