Insurer Must Defend Against Birth Defect Claim, Ninth Circuit Rules

A federal appeals court has determined that Atlantic Specialty Insurance Company is obligated to defend TriQuint Semiconductor in a lawsuit alleging chemical exposure led to birth defects, reversing a prior district court decision. The ruling, issued by the United States Court of Appeals for the Ninth Circuit on February 20, 2026, centers on the interpretation of policy exclusions and the principle of giving the benefit of doubt to the insured.

The Case Background

The lawsuit was initially filed by Pedro Domion, his wife, and their minor child, who alleged that Pedro’s exposure to chemicals whereas working at TriQuint Semiconductor caused birth defects in their child Law360. Liberty Northwest Insurance Corporation had already stepped in to defend TriQuint. Atlantic Specialty, too an insurer for TriQuint, refused to do so, leading Liberty Northwest to seek reimbursement for the full cost of defense.

The Court’s Reasoning

The Ninth Circuit applied Oregon’s standard for insurance coverage disputes: any ambiguity in the policy language should be resolved in favor of the insured. The court scrutinized three exclusions Atlantic Specialty attempted to invoke, ultimately finding that none were clear and unambiguous enough to preclude coverage.

Employer’s Liability Exclusion

The primary point of contention was Atlantic Specialty’s Employer’s Liability Exclusion, designed to bar claims for bodily injury to an employee’s child resulting from the employee’s injury. But, the court found the complaint did not definitively establish how the child was harmed Insurance Business America. The court noted the possibility that Pedro Domion could have brought chemical substances home, exposing the child without sustaining an injury himself. The complaint highlighted potential failures in TriQuint’s safety protocols – ventilation, hygiene policies, and personal protective equipment – which supported this alternative scenario. This ambiguity prevented the exclusion from being applied.

Implications of the Ruling

This decision reinforces the principle that insurers must clearly and unambiguously define the limits of their coverage. The ruling emphasizes that insurers cannot rely on ambiguous policy language to avoid their duty to defend. The case serves as a reminder to insurers to carefully draft exclusions and to consider potential scenarios that could lead to coverage disputes.

Key Takeaways

• Insurers have a duty to defend their policyholders unless the policy explicitly and unambiguously excludes coverage.
• Ambiguous policy language will be interpreted in favor of the insured.
• The specific facts alleged in the complaint are crucial in determining whether an exclusion applies.

The Ninth Circuit’s decision is a significant win for policyholders and underscores the importance of clear and precise insurance policy language.