Whatcom County Council members want to close a loophole that left them unaware of a $225,000 risk pool payout quietly approved for an employee who accused her manager of sexual harassment and retaliation.
While the settlement was officially paid through the Washington Counties Risk Pool, the county reimbursed the risk pool because the county was below its $250,000 deductible for a single claim. Essentially, taxpayers still foot the bill for the entire deductible through this process.
“If the payment is coming from the risk pool, the code does not overtly say that the council will be notified,” council member Todd Donovan told Cascadia Daily News. “We’ve got to fix that.”
Donovan said the county prosecuting attorney’s office’s interpretation of the code contradicts the rule’s intent. His goal is to revise the rule to ensure the council is notified of significant payouts, regardless of whether or not it’s paid through the risk pool. The council found out about the settlement after it was revealed by a Cascade PBS investigative story published in April.
The Washington Counties Risk Pool was created in 1988 to provide comprehensive and economic risk coverage, reduce frequency and severity of losses, and decrease costs incurred in the managing and litigations of claims for member counties.
Whatcom County’s liaison to the risk pool and the prosecuting attorney’s office both praised the entity’s role in helping manage and assess risk and liabilities.
“We have found the people that run the risk pool to be professional and to make appropriate decisions,” Whatcom County Prosecuting Attorney Eric Richey said. “We’ve found them to be careful with our money.”
Costly risk pool payouts since 2014
The risk pool has paid more than $4.5 million in Whatcom County cases since 2014, with about $3 million from the top five payouts, excluding legal costs.
Four cases were paid out above the county’s deductible — the highest payment was $1.5 million to Kathleen Ruth in 2015 after a wheel came off a Whatcom County public works vehicle and struck her while she was walking. Ruth suffered multiple broken bones and required extensive hospitalization resulting in “severe, permanent and distressing” injuries, according to court documents.
The next three most costly payments were connected to inmate deaths in the Whatcom County Jail.
The fifth-largest payout in Whatcom County, though below the deductible, was to the female employee who blew the whistle on the county’s handling of her allegations of sexual harassment and retaliation against former public works director Jon Hutchings.
A data analysis by Cascadia Daily News showed a steady decline in the number of claims filed against the county since the early 1990s. When adjusted for inflation, there has also been an overall downward trend in the amount being paid out — though single incidents create numerous outliers.
What’s the loophole?
Current county code requires settlements for more than $25,000 to be approved by the council. However, council members learned in April that the county prosecuting attorney’s interpretation of County Code 3.05 effectively nullified that oversight.
This is possible because of the county’s membership in the Washington Counties Risk Pool, which it joined in 1988. Since that time, the county, rather than holding the liability of a claim, passes it on to the risk pool. That means the code no longer applies, Richey confirmed.
“That’s no longer us making the settlement,” said deputy prosecutor George Roche, speaking on behalf of the prosecutor’s office in April. “We basically look past 3.05 in its entirety.”
Nonetheless, the county directly pays each invoice from the risk pool below its $250,000 per-claim deductible.
During a public meeting in April, council members openly grappled with understanding how often they’re unaware of large settlements. Multiple council members said they felt blindsided.
“We’ve since asked for information about how many times this has happened,” Donovan told CDN on May 15. “It’s not that common, not in this magnitude.”
While it appears that council members are often apprised of larger settlements, Roche wasn’t able to clearly explain why they weren’t notified of the payment tied to Hutchings.
“Nobody has explained in a satisfactory way why the council didn’t need to know about this particular payment when they were aware of others,” Donovan told CDN.
Roche did previously note that the council could not dictate how the other branches of local government manage employees and that the Hutchings case was a human resources department issue.
In total, only seven employment-related claims have been made against the county in the last decade, confirmed Donnie LaPlante, the county’s associate manager of human resources and liaison to the risk pool.
Whatcom County is a charter county with a strong, independent executive branch, yet the council provides checks and balances through the budget, as well as the ability to launch investigations and issue subpoenas.
The council officially launched an investigation on April 30 into the county’s handling of the allegations against Hutchings.
“I don’t want to be involved with the decisions behind what they decide to pay and who they decide to pay,” Donovan said. “But as the legislative branch, we should know that this is county money going out the door.”
Donovan is one of three council members overseeing the probe.
What is the risk pool?
In the 1970s and 1980s, local government bodies were either being dropped by their insurance or facing rate hikes they couldn’t keep up, explained Washington Counties Risk Pool Executive Director Derek Bryan.
To combat the troubling trend, the Legislature created a framework for these governments to pool their risk through joint self-insurance, joint purchasing of insurance, and joint hiring of a team to provide risk management, claims handling and administrative services.
Dozens of risk pools popped up in the state following the change, serving school districts, cities and counties. Of the 39 counties in the state, 24 are members of the same pool as Whatcom County.
“We are involved in the risk pool for the same reason that people get insurance for everything they do,” Richey said.
If the county was entirely self-insured, it could face a lawsuit judgment greater than the amount of money within the general fund, which would be a disaster, he explained.
“Not only does it provide access to high levels of insurance, which individual counties may not be able to procure on their own, but it also serves as a major resource for knowledge sharing, training and best practices in the area of risk management,” LaPlante told CDN.
The 12-member team at the risk pool includes a finance and administrative staff, as well as risk managers, three claims adjusters and department heads. Though the risk pool has claim adjusters on staff, it should not be confused with being an insurance company, Bryan said.
Counties are required to report every single claim “from dollar one” to the pool, Bryan said. In certain serious situations, such as fatalities or brain injuries, the risk pool asks that counties inform them immediately, even if no claim is made.
“We work directly with the county on handling the claims, but once we’ve determined that we may owe the claim — that there’s negligence — then we can pay it,” he said.
The counties then must reimburse the pool for the claim up to their deductible. The risk pool covers counties for the first $3 million in any given claim and beyond that various excess and reinsurance layers kick in, Bryan explained.
Some liabilities are not covered by the risk pool, including those connected to public records, airports and the ferry system.
“It’s impossible to eliminate all exposures and all claims,” Bryan said, noting that a certain amount of risk is inherent to county operations.
The pool requires member funding to pay the administrative costs of the operation, the premiums for its insurers and the costs of payouts for claims against its members, Bryan explained.
The total costs are divided between member counties based on the number of “worker hours” in each county, so larger counties with more liabilities pay more than smaller counties with fewer liabilities. These are then adjusted slightly based on the deductible size a county pays and an “experience rating,” which is essentially how well it manages risk.
“Whatcom County is actually an exceptional member of the pool and does a really good job when it comes to risk,” Bryan said.
Because of this, Whatcom County’s experience rating gives it a nearly 17% discount.
Bryan explained that the risk pool moves in “lockstep” with the county liaisons and that it would not move forward with a settlement or resolution without the county’s agreement.
Isaac Stone Simonelli is CDN’s enterprise/investigations reporter; reach him at isaacsimonelli@cascadiadaily.com; 360-922-3090 ext. 127.
