Coca Cola 2006 Annual Report Download - page 23

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 the 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 the 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. Two of the insurers, one with a $15 million policy
limit and one with a $25 million policy limit, have asserted cross-claims 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 insurers to pay for those costs under their policies.
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 settlements with six 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 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 remaining insurers that are parties to the Wisconsin insurance coverage case.
To the extent that these negotiations do not result in settlements, the Company believes that there are
substantial legal and factual arguments supporting the position that the insurance policies at issue provide
coverage for the asbestos-related claims against Aqua-Chem, and both the Company and Aqua-Chem have
asserted these arguments in response to the complaint. The Company also believes it has substantial legal and
factual defenses to the claims of the cross-claimant insurer.
The Company is discussing with the Competition Directorate of the European Commission (the ‘‘European
Commission’’) issues relating to parallel trade within the European Union arising out of comments received by
the European Commission from third parties. The Company is fully cooperating with the European Commission
and is providing information on these issues and the measures taken and to be taken to address any issues
raised. The Company is unable to predict at this time with any reasonable degree of certainty what action, if any,
the European Commission will take with respect to these issues.
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