Coca Cola 2005 Annual Report Download - page 22

the plaintiffs’ allegations, including the claim that the Company made knowingly false statements to financial
analysts. The Court permitted the remainder of the allegations to proceed to discovery. The Court denied the
plaintiffs’ request for leave to further amend and replead their complaint. Discovery commenced on May 14,
2004, and is ongoing. The discovery cutoff is September 30, 2006.
The Company believes it has substantial legal and factual defenses to the plaintiffs’ claims.
On December 20, 2002, the Company filed a lawsuit (The Coca-Cola Company v. Aqua-Chem, Inc., Civil
Action No. 2002CV631-50) in the Superior Court, Fulton County, Georgia (the ‘‘Georgia Case’’), seeking a
declaratory judgment that the Company has no obligation to its former subsidiary, Aqua-Chem, Inc.
(‘‘Aqua-Chem’’), for any past, present or future liabilities or expenses in connection with any claims or lawsuits
against Aqua-Chem. Subsequent to the Company’s filing but on the same day, Aqua-Chem filed a lawsuit
(Aqua-Chem, Inc. v. The Coca-Cola Company, Civil Action No. 02CV012179) in the Circuit Court, Civil Division
of Milwaukee County, Wisconsin (the ‘‘Wisconsin Case’’). In the Wisconsin Case, Aqua-Chem sought a
declaratory judgment that the Company is responsible for all liabilities and expenses not covered by insurance in
connection with certain of Aqua-Chem’s general and product liability claims arising from occurrences prior to
the Company’s sale of Aqua-Chem in 1981, and a judgment for breach of contract in an amount exceeding
$9 million for costs incurred by Aqua-Chem to date in connection with such claims. The Wisconsin Case initially
was stayed, pending final resolution of the Georgia Case, and later was voluntarily dismissed without prejudice
by Aqua-Chem.
The Company owned Aqua-Chem from 1970 to 1981. During that time, the Company purchased over
$400 million of insurance coverage, of which approximately $350 million is still available to cover Aqua-Chem’s
costs for certain product liability and other claims. The Company sold Aqua-Chem to Lyonnaise American
Holding, Inc. in 1981 under the terms of a stock sale agreement. The 1981 agreement, and a subsequent 1983
settlement agreement, outlined the parties’ rights and obligations concerning past and future claims and lawsuits
involving Aqua-Chem. Cleaver Brooks, a division of Aqua-Chem, manufactured boilers, some of which
contained asbestos gaskets. Aqua-Chem was first named as a defendant in asbestos lawsuits in or around 1985
and currently has more than 100,000 claims pending against it.
The parties agreed in 2004 to stay the Georgia Case pending the outcome of insurance coverage litigation
filed by certain Aqua-Chem insurers on March 26, 2004. In the coverage action, five plaintiff insurance
companies filed suit (Century Indemnity Company, et al. v. Aqua-Chem, Inc., The Coca-Cola Company, et al., Case
No. 04CV002852) in the Circuit Court, Civil Division of Milwaukee County, Wisconsin, against our Company,
Aqua-Chem and 16 insurance companies. Several of the policies that are the subject of the coverage action were
issued to the Company during the period (1970 to 1981) when our Company owned Aqua-Chem. The complaint
seeks a determination of the respective rights and obligations under the insurance policies issued with regard to
asbestos-related claims against Aqua-Chem. The action also seeks a monetary judgment reimbursing any
amounts paid by the plaintiffs in excess of their obligations. One of the insurers with a $15 million policy limit
has asserted a cross-claim against the Company, alleging that the Company and/or its insurers are responsible
for Aqua-Chem’s asbestos liabilities before any obligation is triggered on the part of that cross-claimant insurer
to pay for those costs under its policy.
Aqua-Chem and the Company filed and obtained a partial summary judgment determination in the
coverage action that the insurers for Aqua-Chem and the Company were jointly and severally liable for coverage
amounts, but reserving judgment on other defenses that might apply. Aqua-Chem and the Company
subsequently reached a settlement agreement with five of the insurers in the Wisconsin insurance coverage
litigation, and those insurers will pay funds into an escrow account for payment of costs arising from the asbestos
claims against Aqua-Chem. Aqua-Chem also has reached a settlement agreement with an additional insurer
regarding payment of that insurer’s policy proceeds for Aqua-Chem’s asbestos claims. Aqua-Chem and the
Company continue to negotiate their claims for coverage with the 15 remaining insurers that are parties to the
coverage case. To the extent that these negotiations do not result in settlements, the Company believes that there
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