> This makes union types unsound in the presence of type parameters/generics.

I'm not sure if "unsound" is a good adjective here. There are cases where this is actually desired behaviour and the rules can definitely be "sound".

For example, I might want to know what errors can appear, but not care where they come from. So `ErrorA | ErrorB` is what I want to see, not some nested structured that allows me to differentiate where ErrorA came from in case that there are multiple possible options.