Washington state ballooning lawsuit settlements, legal costs add to budget woes

SEATTLE – In May of 2022, police and medics responding to a 911 call found 2-year-old Jose Fernandez Armas dead in a Kent motel room with a fractured skull and jaw and massive internal injuries.

His mother, Sandy Fernandez, then 19, was arrested and charged with murder after admitting she’d struck the boy in the abdomen and slammed him to the ground, according to court records.

Fernandez pleaded not guilty. A trial, delayed several times, is scheduled for April.

While the outcome of the criminal case remains uncertain, civil liability for Jose’s death was laid at the feet of the state of Washington and its taxpayers.

The state paid $17 million last year to settle a lawsuit alleging a shoddy child welfare investigation by the Department of Children, Youth, and Families – closed five days before Jose’s death – was to blame.

The settlement, which has not been previously reported, is just one example of a growing liability bomb facing state government.

Over the past two fiscal years, Washington has shelled out more than $500 million to settle lawsuits and tort claims alleging negligence or misconduct by state agencies, according to a report by the state’s risk management office.

The bulk of that – more than $370 million – is the result of lawsuits and claims against DCYF, which runs the state’s child welfare investigations and foster care system. Many of the settlements stem from alleged abuse at state-run youth facilities decades ago. Court decisions loosening the statute of limitations and expanding how long people can wait to file such cases have played a role.

Other lawsuits, like the case of Jose Fernandez Armas, involve more recent failings.

Soaring legal costs

The payouts reached a new high of $281 million in the 2024 fiscal year, which ended last June. In the 2023 fiscal year, the state paid out $223 million. Those legal costs have soared. In the previous six fiscal years, the state’s annual legal payouts had averaged $123 million.

In addition, the state faces $2.5 billion in future liabilities based on lawsuits and tort claims already filed, according to an actuarial analysis.

The state is self-insured, so such settlement payouts siphon money that could otherwise go to schools, state patrol officers or social services.

Washington’s legal costs have spiked so much of late they drained the state’s self-insurance fund, which needs a $159 million transfer to restore “a positive cash balance,” according to a funding request memo from the Department of Enterprise Services, which runs the state’s risk-management office. Former Gov. Jay Inslee included the money in his final budget proposal in December.

As Washington lawmakers wrestle with a projected budget shortfall of more than $10 billion over the next four years, the legal costs are adding to the headaches.

Gov. Bob Ferguson acknowledged the payouts are a concern.

“Of course it’s a problem. It’s a problem because there are dollars going out the door. It’s also a problem because often something has gone wrong, somebody’s been harmed,” he said in an interview with The Seattle Times in December.

In 12 years as attorney general before being elected governor, Ferguson presided over the state’s legal defense in lawsuits against agencies. Those defense costs have also soared to more than $106 million over the past two fiscal years, including $26 million paid to outside law firms.

As governor, Ferguson said his office will work with Attorney General Nick Brown to examine ways to improve the situation. “That will be happening, for sure, I know that,” he said.

Meanwhile, some Republican lawmakers are trying to draw attention to the rising lawsuit costs.

Legislative hearings proposed

State Sen. Chris Gildon, R-Puyallup, introduced a bill cosponsored with five other Republicans that would require legislative hearings on settlement payouts of $1 million or more.

Senate Bill 5144 would give legislators at such hearings a chance to review the relevant agency’s actions, “including an examination of what changes could be made to prevent such harm in the future.”

Gildon, the Senate Republicans’ budget lead, said he’s been alarmed by the lawsuit payouts. “It is certainly one of the fastest growing costs in our budget,” he said, describing his proposal as an “after-action report” for agencies on what they can do better.

“If the agencies know they’re going to have to come before the Legislature and explain themselves, I think they will be less likely to allow or excuse bad behavior,” he said.

But Democrats, who hold controlling majorities in the Legislature, have shown no interest in Gildon’s proposal.

State Sen. Manka Dhingra, D-Redmond, who chairs the Senate Law and Justice Committee, did not respond to a request for comment on why she has not scheduled the bill for a public hearing or vote.

Meanwhile, the state’s legal payouts show no sign of abating. In the first six months of the 2025 fiscal year (from July through December), the state has already paid out more than $261 million in legal settlements.

The outlays represent more than just a cost to taxpayers. The costliest cases typically come when there is evidence the state has fallen down on its obligations to children or other vulnerable people.

“You wish they wouldn’t have to make these large payouts, but unfortunately when the agency keeps failing children, this is the result,” said Tim Tesh, a partner at the law firm of Ressler & Tesh, which filed the lawsuit over the death of Jose Fernandez Armas on behalf of the boy’s biological father, Brayden Earl.

‘The state failed Jose’

A few months before Jose’s death, DCYF received a report that he was being abused by his mother’s boyfriend in the room the three of them shared at the Kent motel where she worked as a housekeeper, according to a January 2024 summary judgment motion filed in King County Superior Court.

Two family friends reported to DCYF they’d seen suspicious bruising on the boy’s back and thigh. A caseworker showed up and took photos of the bruises. But over the succeeding months, DCYF did little else to investigate, according to the lawsuit.

An assigned DCYF social worker later testified Jose should have been removed from his mother’s custody given the seriousness of the allegations. That didn’t happen.

Instead, on May 18, 2022, DCYF “effectively closed the investigation” by issuing a determination that Jose was safe, according to the summary judgment filing.

He was found dead five days later, with multiple broken bones, contusions and internal injuries that led to a fatal infection.

“The State failed Jose, and Jose paid for this failure with his life,” wrote attorney Zachary Davies in the motion.

Attorneys for the state responded in a February 2024 court filing which conceded DCYF had conducted “an incomplete investigation” into the abuse allegations.

Nevertheless, assistant attorneys general Connor Callahan and Jordyn Jones argued it was “speculative” to assert DCYF could have convinced a judge to order the boy’s removal or taken other actions that would have prevented his death.

Days later, before a looming trial set for the next month, the state settled the case for $17 million.

It was the largest settlement payout by the state for the fiscal year.