Former AG Rob McKenna blames Washington’s $1.7 billion payout crisis on ‘strict liability regime’

Washington’s self-insurance liability fund has fallen more than $1.7 billion into deficit, driven by a surge in large legal settlements and judgments, according to state financial officials.

The Office of Financial Management recently authorized the state’s Liability Account to operate in a temporary cash deficiency of up to $1.7 billion through June 30, 2027, citing the timing of payments for settlements and judgments against the state. Officials said several large payments remain under federal review, directly impacting the need for increased deficit authority.

Former Washington Attorney General Rob McKenna said the mounting payouts largely stem from situations in which the state is held responsible for harm caused by others.

“These really large payoffs, which over the last year have totaled about $500 million, are generally resulting from the actions of third parties, not the direct actions of someone in government,” McKenna said.

He pointed to the state’s child welfare system as an example of how liability can attach regardless of the decision made.

“If a child was left in foster care and something bad happens, then, because the foster parents do something bad and harm the child, the state is liable,” McKenna said. “On the other hand, if the child is not put in foster care and is left with the parents and something bad happens, the state is liable. So we’re in kind of a strict liability regime.”

McKenna says other states have limits on liability payouts

While McKenna said compensation is appropriate when the state causes harm, he argued Washington stands apart from other states.

“Every other state has some sort of limit on how much can be paid out, and yet in a recent case in Washington, where two children were left in the care of their parents and harmed by the parents, the state settled for $80 million,” he said.

The Department of Children, Youth, and Families has been at the center of many of the payouts. McKenna said the agency is settling cases to avoid even larger jury verdicts.

“What’s going on is that they are afraid that the judgments in court will be even larger if they go to a jury trial,” he said, citing a roughly $130 million jury award involving the death of a toddler. “They’re worried about juries here in western Washington handing out enormous judgments, and so they’re settling for enormous amounts to avoid the even larger judgments.”

The money to cover the judgments ultimately comes from taxpayers, McKenna said.

“It comes from state general funds,” he said. “Every state agency has a budget for legal expenses and for payouts. That money has to come from somewhere. It comes from state budgets, but state budgets get their money from the taxpayers.”

‘We need guardrails’: McKenna pushes for liability limits as budget shortfall looms

The strain comes as Washington faces a projected multibillion-dollar budget shortfall.

McKenna said the solution lies in adopting limits used elsewhere, an issue he examined in a 2005 law review article written during his tenure as attorney general.

“Other states have some sort of guardrails on the amount that they can be liable for, and this is true for local governments as well,” he said. “We need to get rid of the open-ended waiver of what’s called sovereign immunity and have a statutory scheme that defines the extent of liability for various government functions like children’s welfare.”

He noted Washington was paying out far more than comparable states even two decades ago.

“I think it was six times more than Massachusetts per year at that time,” McKenna said. “We need to put in some guardrails and put limits on the amounts that people can recover from the state, which is what other states do.”

Manda Factor is the host of “Seattle’s Morning News” on KIRO Newsradio. Follow Manda on X and email her here. 

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