A commercial general liability insurer had a duty to defend a semiconductor manufacturer against an employee's suit claiming that his exposure to chemicals at work caused birth defects in his son, the Ninth Circuit ruled Friday, finding that certain policy exclusions did not unambiguously foreclose coverage.

In an unpublished opinion, a three-judge panel reversed Atlantic Specialty Insurance Co.'s summary judgment win and remanded the case with orders to grant summary judgment for Liberty Northwest Insurance Corp., which defended TriQuint Semiconductor Inc. in the underlying suit.

The panel also remanded for additional proceedings on Liberty's claim for damages related to Atlantic Specialty Insurance Co.'s failure to defend.

The coverage dispute stems from a $270 million suit lodged against TriQuint by employee Pedro Domion; his wife, Ashley Domion; and their child, Nicholas Domion, in July 2016.

The underlying suit alleged that while working for TriQuint, Pedro Domion came into contact with numerous chemical products and substances such as cyanide, mercury, and arsenic compounds and radio frequency radiation. As a result of his exposure, the family said, Nicholas Domion was born in July 2009 with significant injuries, including chromosomal deletion, heart defects, and mental and cognitive impairment, among other things.

Liberty, which insured TriQuint under a workers' compensation and employer's liability policy, agreed to provide the company with a defense, while Atlantic Specialty Insurance Co.'s predecessor, OneBeacon America Insurance Co., denied TriQuint's request for coverage, according to court filings.

The underlying suit was ultimately settled and dismissed with prejudice in April 2021.

Liberty sued Atlantic Specialty Insurance Co. in December 2022, seeking a declaration that Atlantic Specialty Insurance Co. had an obligation to defend TriQuint in the underlying action. Liberty, which said it paid more than $2.4 million in legal fees and other costs to defend TriQuint, said it was owed $1.6 million plus interest from the commercial general liability insurer.

Ruling on the parties' cross-motions for summary judgment, U.S. District Judge Adrienne Nelson held in November 2024 that an employer's liability exclusion in Atlantic Specialty Insurance Co.'s policy barred coverage for some of the underlying claims and a pollution exclusion fully relieved the insurer of its duty to defend.

The Ninth Circuit on Friday concluded that none of the three exclusions cited by Atlantic Specialty Insurance Co. applied to the underlying suit.

Although the employer's liability exclusion in Atlantic Specialty Insurance Co.'s policy bars coverage for bodily injuries to an employee's child that are "a consequence of" an injury to that employee, the panel noted that the underlying suit does not specify any mechanism of Nicholas Domion's injuries.

"Rather, it leaves open the possibility that the employee's minor child was injured without injury to the employee himself," the panel said. "Indeed, the underlying complaint alleges that TriQuint's ventilation, 'industrial hygiene policies,' and 'personal protective equipment' were inadequate, suggesting that the employee may have brought the chemical products and substances home without sustaining injury himself."

Additionally, the underlying suit does not allege bodily injury arising out of the discharge, dispersal, seepage, migration, release, or escape of pollutants, the panel said.

Instead, the suit alleged that Pedro Domion was "exposed" to chemical products and substances at TriQuint's facility. Applying the pollution exclusion to such exposures that occurred in the vicinity of intended use would "strain the plain meaning" of the exclusion, the panel held.

An endorsement barring coverage for bodily injury arising out of exposure to electromagnetic radiation also does not apply since the underlying suit alleged that chemical products and substances caused Nicholas Domion's birth defects, the panel said.

Representatives for the parties did not immediately respond to requests for comment Friday.

Judges Morgan Christen, Andrew D. Hurwitz, and Roopali H. Desai sat on the panel for the Ninth Circuit.

Liberty is represented by Chester D. Hill and Paul A. C. Berg of Cosgrave Vergeer Kester LLP.

Atlantic Specialty Insurance Co. is represented by Sara L. Menton and Christian P. Jones of Intact US Coverage Litigation Group and Adam E. Jones of Davis Wright Tremaine LLP.

The case is Liberty Northwest Insurance Corp. v. Atlantic Specialty Insurance Co. et al., case number 24-7353, in the U.S. Court of Appeals for the Ninth Circuit.