A federal appeals court has ruled that an insurer cannot use policy exclusions to dodge its duty to defend.
On February 20, 2026, the United States Court of Appeals for the Ninth Circuit ruled that Atlantic Specialty Insurance Company was obligated to defend TriQuint Semiconductor in a lawsuit tied to chemical exposure at one of its facilities – reversing a lower court decision that had let the insurer walk away from that obligation.
The case began when TriQuint employee Pedro Domion, along with his wife and minor child, sued the semiconductor company alleging that Pedro's on-the-job exposure to various chemical products and substances caused birth defects in the couple's child. Liberty Northwest Insurance Corporation, one of TriQuint's insurers, stepped up and defended the company. Atlantic Specialty, which had also issued insurance policies to TriQuint, did not. Liberty Northwest then took Atlantic Specialty to court to recover for carrying the defense alone.
The district court originally sided with Atlantic Specialty. The Ninth Circuit disagreed and reversed that decision.
The appeals court applied Oregon's well-established approach to these disputes: line up what the lawsuit claims against what the policy covers, and when there is any doubt, give the benefit to the insured. Under that standard, an insurer can only refuse to defend if the policy clearly and unambiguously rules out coverage. Atlantic Specialty fell short of that mark on all three exclusions it tried to invoke.
The first was its Employer's Liability Exclusion, written to bar claims for bodily injury to an employee's child caused as a consequence of injury to the employee. The problem, the court found, was that the Domion complaint never actually pinned down how the child was harmed. It left open a scenario where Pedro brought chemical products and substances home without sustaining any injury himself, and the child was exposed that way. The complaint had flagged failures in TriQuint's ventilation, industrial hygiene policies, and personal protective equipment, which only reinforced that possibility. With that ambiguity in play, the exclusion could not cleanly apply.
Atlantic Specialty's second attempt relied on its Pollution Exclusion, which targeted injuries caused by the discharge, dispersal, seepage, migration, release, or escape of pollutants. The court found that the Domion complaint described nothing of the sort – just a worker exposed to chemical products and substances while working with them inside TriQuint's facility. Stretching that exclusion to cover those circumstances, the court said, would strain the plain meaning of the provision.
The third argument, built around an Electromagnetic Radiation Endorsement that excluded injuries alleged to have been caused by electromagnetic radiation, was the quickest to fall. The Domion lawsuit was about chemicals, not radiation, and the endorsement simply had no bearing on the claims. The court also reiterated a key principle of Oregon insurance law: as long as a complaint can reasonably be read to include at least one covered claim, the insurer has a duty to defend – even if other parts of the complaint might fall outside the policy.
The Ninth Circuit sent the case back to the district court with instructions to enter judgment in Liberty Northwest's favor on the coverage question, with damages and remaining issues still to be worked out.
For insurance professionals, the ruling reinforces a standard that Oregon courts – and federal courts applying Oregon law – consistently uphold: exclusions must do more than plausibly fit the facts. They must unambiguously foreclose coverage. Anything short of that, and the duty to defend stays firmly in place.
