Lawsuit payouts put WA insurance fund at $1.7 billion in the red

Washington state’s costly lawsuit liability problem continues to grow.

Ballooning legal payouts - largely due to cases of alleged abuse and neglect in the child-welfare system - have pushedthe state’s self-insurance fund to $1.7 billion in the red.

That latest temporary cash deficiency” figure was disclosed in a memo issued Thursday by K.D. Chapman-See, director of the state office of financial management, the top budget official for Gov. Bob Ferguson.

Chapman-See’s memo authorized the self-insurance fund to run with a deficit up to $1.7 billion through next June. That’s higher than the $1 billion shortfall she projected for the same period just last year.

The rising tort costs are sure to add to the state’s budget woes. Despite passing billions of dollars in higher taxes over the past two years, including a new high-earners income tax, the state’s expected tax collections are not keeping up with projected expenses.

Saying he won’t propose more taxes, Ferguson recently directed agencies to come up with “significant and ongoing spending cuts” to deal with the shortfall. The governor is preparing his first full biennial budget proposal ahead of the 2027 legislative session.

Over the past three fiscal years, the state paid out more than $1 billion in judgments and settlements of tort claims and lawsuits, according to the state risk management office.

The final totals for the 2026 fiscal year, which ends June 30, have not yet been disclosed, but the costs appear to be continuing to spike.

Last week, the state agreed to pay $80 million to settle a pair of lawsuits filed on behalf of two children alleging state caseworkers negligently left them in the care of their biological parents, leading to life-altering injuries including near-fatal burns.

State law generally prohibits agencies from operating in the red, so Chapman-See’s memo was legally required for the Department of Enterprise Services, which runs the self-insurance fund, to run it at a deficit.

The current shortfall is in part due to a gap between when the state pays out settlements and judgments and when agencies reimburse the self-insurance fund through premiums, the memo stated.

Chapman-See also wrote that several large federal payments remain “under federal review, contributing to the latest deficit. The memo did not detail which payments are getting held up.

The state’s recently approved 2026 supplemental budget included about $1.1 billion for the insurance fund, but the money has not yet been shifted to the account, Chapman-See noted.

A spokesperson for the office of financial management had no immediate comment on the latest shortfall.

State lawmakers have been looking at ways to rein in the growing liability costs, which are draining money that could otherwise be spent on public services.

State Sen. Manka Dhingra, D-Redmond, called the situation unsustainable earlier this year, proposing a bill requiring civil arbitration before people can sue the state. The hope was to resolve cases more quickly and cheaply. But the idea died amid strong opposition from trial lawyers and advocates for victims of abuse.

Instead, the Legislature agreed to spend $50,000 to create a 14-member task force to study the liability problem and come up with recommendations and a report by Nov. 1.

But that task force, called the Tort Study Committee, has gotten off to a slow start - hampered by a delay in Ferguson appointing two of its members.

The group cut short a scheduled 3 ½-hour Zoom session this week, agreeing to postpone its substantive work until the governor finishes his appointments.

Brionna Aho, a spokesperson for Ferguson, said in an email Thursday evening the governor has since filled one of those slots and is working to make the final appointment before the committee’s next meeting.

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This story was originally published June 18, 2026 at 11:36 PM.