Ninth Circuit Recognizes the Potential for Coverage in Employee's Suit Alleging Chemical Exposure
The Ninth Circuit reversed a lower court and held that insurer Atlantic Specialty (as successor to One Beacon) had a duty to defend an employee’s suit against his employer, a semiconductor manufacturer. In the underlying claim, the employee alleged exposure to chemicals at work caused birth defects in his son and sought $270M in damages. One of the manufacturer’s insurers (Liberty) defended the manufacturer and sought contribution from the manufacturer’s other insurer, Atlantic Specialty. The lower court granted summary judgment to Atlantic Specialty based an employer’s liability exclusion and a pollution exclusion.
The Ninth Circuit reversed the district court holding that Atlantic Specialty had a duty to defend because the exclusions relied on by the lower court did not “unambiguously foreclose coverage.” With respect to the employer’s liability exclusion, the Ninth Circuit held that the exclusion did not apply because the underlying claim did not allege that the injury to the employee’s child was a consequence of an injury to the employee himself. In connection with the pollution exclusion, the Ninth Circuit held the pollution exclusion clause did not apply because the alleged injury did not arise out of the discharge, dispersal, seepage, migration, release or escape of pollutants as required by the exclusion. Instead, the claim at issue was due to “exposure” and “it would strain the plain meaning of the pollution exclusion to apply it to these exposures occurring in the vicinity of intended use.” The case was remanded for entry of summary judgment for Liberty.
