Politics & Government

State to pay former insurance commissioner’s judge $450,000 to settle job claims

Patricia Petersen, a longtime administrative hearings officer caught up in a workplace dispute with state Insurance Commissioner Mike Kreidler’s office, agreed to leave the agency last month as part of a $450,000 settlement of her claims.

The Office of the Insurance Commissioner released details of the agreement last week after receiving a records request from The Olympian and The News Tribune.

The agreement, reached after mediation, says $100,000 of the money will go to Petersen’s lawyers. She left the agency at the end of October after 26 years as a hearings officer.

“We believe that she was removed from hearing cases in May and threatened with termination because she protested the attempts to interfere with her independent judicial decision-making, and then brought those same concerns to the state auditor,” Petersen’s Seattle-based lawyer Michael Subit said in an interview Friday when asked what specific claims they had raised with the agency.

Subit and Petersen declined to discuss the settlement details with a reporter; the agreement has a clause preventing the parties from discussing the settlement itself with news media.

The agency’s chief spokesman, Steve Valandra, also declined to explain why the agency settled the dispute. He said Petersen earned just over $80,000 a year after her position went to full time late in 2013.

“The parties have come to a resolution of their differences and have decided to go their separate ways,” Valandra said in a written statement that was taken word-for-word from the legal agreement, which limited parties’ comments about the settlement to the words he used.

Petersen served in the agency under three commissioners and has said she received good employment evaluations until Kreidler’s office made a change in personnel last year, installing Jim Odiorne as a new chief deputy commissioner.

In a mid-year evaluation of Petersen, Odiorne found fault with her decisions. The evaluation said, “I find that your orders do not consistently evidence an understanding of (the) commissioner’s policy and program goals.”

It went on to say that in one case involving an insurance license “you have allowed the felon to get or maintain a producer license, potentially exposing consumers to personal or financial danger. Exposing consumers to increased potential for harm is contrary to commissioner’s policy and program goals.”

In mid-May, Kreidler placed Petersen on administrative leave amid concerns she had improper out-of-court contact with a lawyer for Seattle Children’s Hospital in an ongoing case that dealt with rules adopted by the OIC. The commissioner also hired an outside investigator to look into what Petersen had done.

Judicial rules forbid contacting just one party in an ongoing case, and in a May 27 letter to Kreidler, Petersen admitted she did just that by sending the lawyer a fax.

After the investigator found she had not been truthful initially about her out-of-court contact, Kreidler’s office began looking into possible sanctions.

But Subit said Petersen never admitted doing anything wrong, only to making a “mistake” by emailing the Children’s Hospital lawyer a copy of a whistleblower complaint she’d filed with the state Auditor’s Office. Subit said the complaint, which the Auditor’s Office declined to investigate, contained substantially the same allegations Petersen had laid out earlier the same day in a disclosure to parties in the Children’s Hosptial case. Namely, the disclosures dealt with her view that the agency was interfering with her independent decision-making.

“There’s a difference between being wrong and lying. She was wrong … At the time she believed it was the truth,” Subit said. “The report never found that she lied. She didn’t lie; she made a mistake.”

Despite the settlement, questions about judicial independence in state agencies are not going away.

Petersen’s case prompted hearings in the Senate Law and Justice Committee in June, called by Republican Sen. Mike Padden of Spokane Valley, the chairman. Padden raised questions about whether the administration of Kreidler, a Democrat, was interfering with a proper judicial role.

Phil Talmadge, Petersen’s attorney at the time, urged lawmakers to consider moving the administrative judge’s role out of the agency and putting it in the Office of Administrative Hearings, which already handles judicial hearings for many state agencies.

Kreidler insisted an in-house judge was necessary to rule on challenges to agency rule-making, because health law is complex and he needed someone who understood agency policies.

Padden has indicated he intends to introduce legislation in January dealing with the independence of hearings judges. And Petersen said in an interview she intends to speak out on behalf of reforming the state’s process of having in-house hearings officers and judges, believing “the temptation is too great to direct the judges embedded in agencies to a resolution they want.”

“I actually tried for eight entire months to get this situation remedied within the agency,” Petersen said. “It had never happened in 26 years I served as a judge. I tried for eight months both to educate them and change their minds about trying to influence me. I think as the cases got higher stakes and higher political impact, things simply got worse.”

Petersen signed the settlement order on Oct. 29 and Kreidler signed it two days later. Payment is to occur within 60 days.

As part of the agreement, OIC agreed to withdraw documents from Petersen’s personnel file, including the July 1 investigative report into Petersen’s conduct, a home-assignment letter sent to her in May, a July notice of intent to discipline her, and a letter from Kreidler revoking her authority to act as a presiding judge.

The agreement also says its terms “do not constitute an admission by any party as to the validity of any claims or defenses of any other party.”