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June 17, 2014 at 8:12 AM

Gag order in insurance-commissioner ruckus makes case for reform

Attorney Phil Talmadge and client Patricia Petersen testify at Monday's hearing of the Senate Law and Justice Committee.

Attorney Phil Talmadge and client Patricia Petersen testify at Monday’s hearing of the Senate Law and Justice Committee.

Even if lawmakers couldn’t ask specific questions about the alleged-nasty-business at the Washington state Office of the Insurance Commissioner, a hearing Monday in the state Senate presented an outstanding argument for reform. It started with the careful way that administrative law judge Patricia Petersen had to choose her words.

Petersen started a ruckus last month when she said her bosses in Commissioner Mike Kreidler’s office have been leaning on her in order to obtain favorable rulings. At Monday’s hearing of the Senate Law & Justice Committee, she spoke publicly for the first time since her accusation — but she labored under a gag order from Kreidler that prevented her from talking specifically about her case.

So Petersen found another way to make her point. In general, she told the committee it is a big mistake for judges to answer to the agency heads who employ them. In the aggregate, it would be “a travesty” if people who appeal state-agency decisions don’t get a fair hearing. “And if a judge is told by a party [to a case] to decide his or her cases in a certain way and one party can threaten the judge’s job if the case is not decided in that party’s favor, then the central pillar of our democracy is corroded.”

The fact that she had to tell her story that way — at Kreidler’s insistence — ties the whole thing up with ribbon and a bow. In written complaints filed previously, Petersen says she was threatened with a negative job evaluation because she wouldn’t submit to control; she now is on administrative leave while Kreidler’s office coordinates an investigation of itself. Maybe speaking generally is the right thing to do in this situation – the matter is bigger than the Office of Insurance Commissioner. Petersen’s job hangs by a thread because she has challenged a system that allows state agencies to dictate the outcome of administrative hearings. The problem ought to appall anyone who believes the judicial system should operate with a semblance of fairness.

Administrative hearings are different from traditional court hearings, and big concerns about their fairness led lawmakers to create an independent Office of Administrative Hearings in 1981. Currently the office serves 26 agencies and yet most haven’t ceded full authority. Administrative judges have final say in child-support and unemployment-insurance cases. In other cases, final orders go back to the agency in question, and the agency director can change findings of fact and findings of law, even reverse the decision.

“This would be like having the judges of the Washington Supreme Court being subject to review by the chief of staff of the governor,” said former Supreme Court justice Phil Talmadge. Consider him an authority on the topic. Not only is he representing Petersen, as a lawmaker he cosponsored the bill creating the hearings office.

Tim Parker, an attorney representing insurance-industry clients for the firm Carney Badley & Spellman, said he remembers taking his first case to the Office of Administrative Hearings and savoring victory. Then the case was kicked back to the commissioner’s office, which reversed the decision. Most insurance-industry plaintiffs don’t bother with the independent office; instead they go to the hearings process maintained by the commissioner, which is equally vulnerable to the agency’s influence. Appellants can go to Superior Court after an adverse ruling, but the courts presume the agency is innocent and plaintiffs face a stiff burden for reversal. Parker says clients from other states are stunned when he explains the Washington way: “They say, ‘In the state of Washington, if I get a speeding ticket, is the cop going to be the judge?’”

What happened in Kreidler’s office appears clear enough. Petersen’s nasty job evaluation is a matter of record. It clearly does criticize her for failing to support Kreidler in particular cases, including cases that are still in progress. It is hard to see how a perceptive employee would not take that as a hint. The most disturbing thing about the affair is that Kreidler’s office argues its behavior was legally proper. It maintains its reading of the law ought to govern the decisions of any staff hearings examiner, that deviations are an appropriate matter for employee discipline, and that a rebuke is permissible as long as the supervisor is not directly involved in the case. “[Judges] can be spoken to by other people in the agency because they live in the agency,” said AnnaLisa Gellerman, Deputy Commissioner for Legal Affairs.

Some lawmakers are skeptical. Senate Law & Justice Committee Chairman Mike Padden, R-Spokane Valley, is contemplating several bills next session, including measures that would send nearly all state-agency appeals to the Office of Administrative Hearings and prevent agency heads from overturning its decisions. The unfortunate thing is that all the skeptics so far seem to be Republicans – Kreidler is a Democrat. The matter is bigger than party labels. Justice is the sort of thing both teams should embrace.

Comments | Topics: insurance commissioner, mike kreidler, patricia petersen

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