Spurred by an insurance commissioner case, Legislature starts its examination of the independence of hearings judges

Staff writerJune 16, 2014 

Hearings judge Patricia Petersen, who is on administrative leave from her job at the Office of the Insurance Commissioner, testified Monday along with her lawyer Phil Talmadge at the Senate Law and Justice Committee work session on the independence of administrative law judges.

BRAD SHANNON — The Olympian

A Senate committee started work to examine the independence of state hearings judges Monday, and it heard from several parties involved in a dispute at the Washington insurance regulator’s office. Little consensus was reached on what change in the law is needed - if any - in a situation that has partisan undercurrents.

Patricia Petersen, a hearings judge for more than two decades at the Office of the Insurance Commissioner, encouraged lawmakers to pass legislation that draws a brighter line between judges and executive agency leaders. Put on administrative leave last month by Commissioner Mike Kreidler because she had improper contact with a party in a case, Petersen is accusing his top deputy of trying to influence her rulings by tying her employment evaluation to her legal decisions.

But deputies for Kreidler said there is no need to change current rules, which already allow parties to challenge decisions in court if they think his agency was in error. They noted that Kreidler is legally able to sit on cases himself and decide them.

Sen. Mike Padden, the Republican who chairs the Senate Law and Justice Committee, said he wants to continue looking at legislation that could insulate hearings judges from influence.

“I think that certainly will give the public more confidence if it’s completely independent, if you are not going to somebody whose salary is paid for (by the agency) and they’ve got to rule on your case,” Padden said after hearing an hour’s testimony on the subject. “I think that would enhance some credibility.’’

Padden said he would consider the cost of any change before he proposes bills to the 2015 Legislature. But one of his ideas is to end the practice of letting agencies have in-house judges. He would instead send rule-making challenges to the independent Office of Administrative Hearings, which already handles cases for many agencies, and he’d shield their decisions from revisions by the agency.

Sen. Adam Kline, the Seattle Democrat who is the ranking minority member of the committee, said there may be a legitimate question of how to ensure independence of judges deciding administrative law cases. But Kline said the judiciary committee’s action was premature because an independent investigator hired by Kreidler was still looking into Peterson’s case.

Kline said that if there was improper ex parte - or out-of-court - communication in the case, it might have been by Judge Peterson, who sent a copy of her whistle blower complaint against Kreidler to one lawyer in a case involving Seattle Children’s Hospital. Kline also said Republicans may be trying to beat up on the insurance commissioner because he’s a Democrat trying to implement the Affordable Care Act, also known as Obamacare.

Patrick Pearce, an independent investigator hired by Kreidler, is expected to wrap up his inquiry in early July, according to Shannon Beigert, deputy state insurance commissioner for operations. “It will wrap up at the beginning of July. It is my understanding there will be a final report and that report will be publicly available,’’ Beigert told the committee.

A University of Washington law school professor with a background in administrative hearings also testified that “there are major tensions in the system” with having in-house administrative law or hearings judges who are subject to oversight by the agency. But pofessor Deborah Maranville also described a double-function in agencies to write rules and to enforce them, which means that “members of an agency can speak to a presiding officer if they have not been involved in the prosecution or investigation of the case.”

Maranville said one of Padden’s proposals - to criminalize an agency leader’s attempt at influencing a hearing judge - was “overkill.” She said the courts are already burdened and a gross misdemeanor, as one of Padden’s three developing bills might do, could carry sanctions as heavy as nearly a year in jail and substantial fines.

Petersen, the hearings judge, also spoke to the committee but claimed her ability to do so was limited by what she described as a “gag” order from Kreidler’s office.

Kreidler’s office said later that the document referred to by Petersen was actually a nondisclosure agreement that all potential witnesses in the case were asked to sign, including Kreidler. The nondisclosure was meant to ensure that people making statements to the investigator were not talking to each other about the case.

In her remarks to the committee, Petersen said she’d worked for three insurance commissioners since 1984 and until a year ago had not been faulted for her decisions.

“While the situation in which I find myself is difficult, the greater issue of independence of hearing officers is paramount. It would be a travesty to allow Washington’s administrative justice system to operate in a manner that denies appellants their right to due process. Parties must be able to trust that system,” Petersen said. “And if a judge is told by a party to decide his or her cases in a certain way, or one party can threaten a judge’s job if the case is not decided in that party’s favor, then this central pillar of our democratic society is corroded.’’

Petersen’s attorney, Phil Talmadge, told the committee that the question of a judge’s independence is not unique to Kreidler’s agency. He said the Office of Administrative Hearings was created by the lawmakers in 1981 when he, Kreidler and Padden were in the Legislature and they wanted to provide independence and “an appearance of fairness” so that parties could trust the work that was being done.

Timothy Parker, a Seattle lawyer with the Carney Badley Spellman firm who represents clients that have cases before the OIC, also pointed out problems with the structure in effect today at the OIC. He said the set-up raises questions about fairness and breeds cynicism and distrust of the system.

Parker said that even where clients have asked to move the case to the Office of Administrative Hearings, the insurance commissioner was able to overturn the decision.

In one case, Parker said a skeptical client who learned that the hearings officer in a case would an employee of the insurance commissioner said: “ ‘Out there in the state of Washington, if I get a speeding ticket and go to court is the cop going to be the judge?’And I said, ‘I don’t believe that is the case,’ ” Parker said. “But that is the level of cynicism that this system invites.’’

bshannon@theolympian.com

360-753-1688

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