Denial of claim

hello
My insurance co (Colorado) 1 year ago denied a claim for an accident. My payment had crossed in the mail. Meanwhile, they sent me the bill for 2 months. My payment arrived or was found on someones desk and they cashed it. A few weeks later, I was sending in the next months pymt and was involved in my accident. They denied my claim saying I didn't pay the FULL AMOUNT on the second bill that had come. Technically I should have been insured, they tried to say they never received the 1st payment. When I showed proof of the cancelled check, they said a refund had ALREADY been sent to me. It took them 3 more weeks to get my refund back. At the time, I consulted a lawyer and he said I should claim bankruptcy to protect myself and even though I may win with the lawsuit, they had me way under covered and it was the safer way to go. THUS, I did not file suit or even complain. NOW, they have raised my rates from $80 mo to $130 mo on one car! They say its because of my credit (bankruptcy)! that they caused!
HELP! Another agent told me that if they cashed my check, and then sent a refund after the fact, that I would have been insured per day at least up to the point of the denial. Sorry for the length - its complicated! Thanks!