Is this really an Apple problem though, or setting on the kid's phone?
Alerts tend to ignore most settings and blare at whatever some default setting is. Unless you explicitly turn them off. I can see it being really annoying.
To the level of permanent hearing loss - that's stretching it... because I'm sure this kid isn't the only one in the history of ever to have an Amber Alert go off while wearing earphones. But I guess you can pay a doctor enough to claim anything - and Apple will probably just throw some money at it to make it go away, and adjust the default amber alert tone down 1 dB to say they did something proactive about it.
I'm sure Apple ~could~ fight it. They probably have so much data on the phone to show the earphones being used at damaging levels for extended periods of time (it's in the Health app under Hearing, btw, if you want to check it out), but just the press of this will be enough that they won't want to make headlines.