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Posted On: Apr. 20, 1997 12:00 AM CST

HARRISBURG, Pa.-CIGNA Corp. has asked the Pennsylvania Supreme Court to overturn a lower court ruling that vacates the Pennsylvania insurance commissioner's 1996 approval of CIGNA's reorganization.

CIGNA reorganized its property/casualty business to wall off most of its liabilities into a separately capitalized runoff facility. Its ongoing business remains in its active operation.

The Pennsylvania Commonwealth Court last month ordered new hearings that resemble trial-like hearings so policyholders can obtain a clearer picture of the financial wherewithal of the runoff facility. A group of policyholders has objected to the limited notice CIGNA provided them and their inability to cross-examine CIGNA officials and witnesses or review financial data on the runoff facitlity during three public hearings on the transaction.

The Commonwealth Court also ordered Pennsylvania Insurance Commissioner Linda S. Kaiser to recuse herself from the case. It ruled she could not be considered impartial, as she already has issued a final order approving the transaction (BI, March 10).

CIGNA also has asked a federal court in Michigan to rule that the state's insurance commissioner cannot compel CIGNA to make a special deposit of about $100 million to cover the liabilities of Michigan policyholders that CIGNA unilaterally moved into the runoff facility.

Among other things, CIGNA charges that Michigan Insurance Commissioner D. Joseph Olson did not adequately notify CIGNA or hold proper hearings before he issued the special deposit demand last year.