Daniel Auderer was called to the scene of the January 23 crash where another officer struck and killed 23-year-old student Jaahnavi Kandula near her university.
In a video released by the department, Mr Auderer can be heard to say the Indian student’s life had “limited value" and the city should “just write a cheque”.
The officer has said the remarks, made while on a call to a colleague, were taken out of context.
According to The Seattle Times, the officer driving the car, Kevin Dave, was going 74mph when he hit Ms Kandula, and the graduate student’s body was thrown more than 100ft.
Mr Auderer can be heard in the call as he responded to the scene: “But she is dead” and then laughing.
He then adds, while laughing again: “No, it’s a regular person. Yeah, just write a cheque. Eleven thousand dollars. She was 26, anyway. She had limited value.”
The officer, a Seattle Police Department union leader, had been on a call with union president Mike Solan at the time, whose audio is not heard in the clip.
In a statement obtained by radio station KTTH-AM, Mr Auderer said his comments were intended to mimic how the city’s attorneys might try to minimise liability for it for the students’ death.
“I intended the comment as a mockery of lawyers," Auderer wrote, according to KTTH.
“I laughed at the ridiculousness of how these incidents are litigated and the ridiculousness of how I watched these incidents play out as two parties bargain over a tragedy."
The station reported that he acknowledged in the statement that anyone listening to his side of the conversation “would rightfully believe I was being insensitive to the loss of human life,” but that the remarks were “not made with malice or a hard heart”.
The Seattle Police Department said the video “was identified in the routine course of business” and was passed onto managers by a concerned employee.
A probe is now underway by the Office of Police Accountability, a watchdog body in the city. Prosecutors are conducting a criminal review of the crash itself.
Ms Kandula was working toward graduating in December with a master’s degree in information systems from the Seattle campus of Northeastern University.
Her uncle, Ashok Mandula told the Seattle Times: “The family has nothing to say. Except I wonder if these men’s daughters or granddaughters have value. A life is a life."