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The only thing ever published to my knowledge about them working together was back on April 29, 1990 in Music Connection...
"...Hiatt was reportedly "looking for the voice of an angel to sing on the song" and found said voice in the earthy bound form of Karen Peris."
My guess is the label recommended her to him since he too was on A&M Records at the time.
You can see the article and photo here:
http://www.imdiscog.com/articles-1.pdf (pdf - page 12)
Google also turned up this although it costs $2.95 to access it.
John Hiatt takes success in stride
$2.95 - Chicago Sun-Times - NewsBank - Jul 1, 1990"through Your Hands" is a dream song with a hint of Dylan's "Chimes of Freedom," with duet vocals from Karen Peris of the Innocence Mission. ...
http://docs.newsbank.com/g/GooglePM/CSTB/lib00225,0EB372F22540A5D5.html