please the court my name is laura hanson and i represent the appellant federated service insurance company i would request two minutes be reserved for rebuttal please by the district court below in the case area when it ruling that the stated limit of the federated policy applied to this loss as opposed to the mandatory minimum limit in that it is in the no fault statute and is governed by mission michigan supreme court authority who isn't insured provision lists those persons drivers etc who qualify as an insured under the policy and that it has exceptions one of which is the auto sales exception so the driver in this case mr moher while driving was working for west michigan auto auction which is a commercial entity that employed him and so that invoked the auto sales exception of the policy he therefore did not qualify as an insured there is no dispute by selective that that is the case selective agrees that on the facts of this claim and on the plane policy language that he does not qualify as an insurance policy they rely instead on  validation as done by the district court here that the that the provision violates the no fault act let's look at the case law in two thousand and six the michigan court of appeals in america versus brennan up held the auto sales exception and ruled that it applied to bar coverage in that case the court did not address the no fault that they don't file that wasn't raised by the parties and the court in force today as written the court also ruled in that case that the driver did not qualify may not have qualified as a permissive user and therefore fallen within the who is an insurer provision in the first place and selective has relied on that to try and contend that the ruling on the auto sales exception is dicta it is not the court very clearly stated that if the circuit court was correct in ruling that the driver qualified isn't insured then the exception applies because his permitted use was limited to working in a business another commercial auto business where his employer evaluates the risk of the of that driver and determines what kinds of risk there is to personal injury others the auto sales exception doesn't frustrate the intent of the no fold act in this case there's still the limits available there's a one million dollars policy issued by selective to apply to the loss the district court relied on two case the first one is the chrysler citizens vs chrysler case and in that case the trial court determined that the permissive user qualified as an insured under and that the auto sales exception applied but that invalidated the provision based on the no fault that once the court ruled that way then it applied the mandatory minimum limits of forty thousand dollars there are multiple injuries in that case after doing so the case went up on appeal because the insurer was was disputing whether or not they qualified as a permissive user in the first place who were they working for at the time was the issue the court stead very clearly no one is appealing whether or not the the no fault act invalidates the provision it so in that case the court very clearly stated we emphasize that the trial court's violation of public policy ruling is not challenged by any party t appeal so we don't have michigan appellate court of florida that invalidates this provision related to the no fault act we have an invalidation of the customer exception which was done by the michigan supreme court in citizens for suspender a two way back in one nine hundred ninety five and as a result the policies in issues in michigan such as the one that federated issue here issued here that it's a matter of record and we cited the provision that modifies the who is an insured provision to remove the customer exception from the policy and that was done in response to that decision there was nothing makes sense to treat customers different from people like the driver here yes i believe that there is if we look at this of you you'd have to distinguish those cases the customer cases in order to come to that conclusion  and that's what you're doing i doing their customers are different from people who drive it to an auction right right the basis for that is that it's a it's a business to business kind of operation which is different from a customer who may not be a business is that the idea that's the idea or there's no there's no i mean it's a nice theory but there's no is there any michigan case law which supports that stinks not which permits the distinction but which says this is something that we might look at i think that in both the there isn't the case that holds that there isn't a case that there's no case i'm wondering whether the distinction actually makes as much sense as you say it does i mean a customer i'm asking is there any real distinction you say with the distinction is it doesn't make sense when you're dealing between businesses other reason why you would decide both of those the same way rather than differently well i think because both of the both in the michigan supreme court decision federated and in the enterprise decision where the this issue of where should the insurance lie with the owner or not both of those courts reflected on the fact that when the customer  approaches for to use the car they are not aware that the law requires the owner for example when in enterprise when you go rent a car that contract that you signed they're not told well we have the obligation of the owner of the cool to insure this vehicle and that that the same situation applied in the in the citizens versus federated case the court noted that the customer is not told we are insuring this vehicle the vehicle that you're about to test drive we insure that in the we are required to insure it under under michigan law that was there was a comment in both of those cases in that regard when you're dealing with two commercial businesses they're trying to assess risk as between the two of them this it this isn't the first policy that's ever been written that has not a sales exception it's a standard foreign policy it's issued all over the country and we've got no fault laws all over the country as well that require an owner to purchase insurance right so this kinds of ri shifting happens all the time we have to have a michigan supreme courts that case that is we don't allow it in the customer context we just don't but we don't have a case that says that in fact we have intrinsic result within the court of appeals level and so what i'm saying is that the court needs to  look at this issue and address it as if it is different than the custom reception because i think that it is if i could look switch to the mandatory limits issue as well your honor i'd like to address that applies the full limit of a policy when a provision is invalidated for the first time it didn't do it in citizens every single court of appeals case that applied the full limit of the policy did so in connection with reflecting on the fact that there had been an invalidation many years earlier and that the insurer was aware of it we don't have that here and indeed one of the major cases relied upon by selective is the citizens versus chrysler case the one where the trial court ruled a fact the primary case that the district court relied on here that's the case where the trial court ruled that the provision violated the no fault act and then it wasn't appealed so i are position is the court has made no comment on that  that there are no michigan court of appeals opinions that invalidate this provision that's correct the michigan court of appeals decision and citizens versus chrysler specifically said that no party appealed it so it's right and then the other provisions that are addressed by the michigan court of appeals are not this exception they are repeats of the customer exception or the other exceptions that have been previously invalidated the resident relative the provision of the cases i just like to add at the end here as to the mandatory minimum limits what the courts have ruled in those cases is that the carrier when the policy limit the stated limit is apply the carrier has to either knew or should known that this provision has been invalidated and in those cases where the stated limit was applied all of them had a previous appellate decision in validating it and we don't have that here but suppose hypothetically that there were a bunch of michigan court of appeals decisions invalidating every single other exception of the nature of this no sales exception could your client say well we didn't know that our it was to be treated the same as every other one well i think it it depends on the exception i mean this one's different at the other cases aren't the same why is this one different it's different because you dealing with two commercial and it is with two commercial pilots it is a commercial it's because of personal auto policy is just simply different it you know you're dealing with a personal auto policy and the court specifically said in citizens versus federated that the that the the auto dealership cannot shift that liability to the personal auto policy of a customer it's just it's just a different we're talking public policy or we're not talking about it about an over by aleisha we've got it we've got a public policy indicating what we should what policy where their commercial or personal in the face of a direct challenge under the michigan no phone act has found that it was void as a matter of law and has there been a michigan court of appeals opinion with respect to this particular exclusion i believe it's and that's the citizens insurance company of america v chrysler counsel for federated has argued throughout this litigation that because there was a footnote in that decision saying that neither party appealed the issue of whether the auto sales exception was void in my opinion because it's so obvious there's no point to continue to argue this the court after that foot your opinion  footnote where they said spankie that's the driver was not insured under the terms of the chrysler policy however it violated public policy for the owner of the truck on a good ford to fail to provide coverage for a permissive user such as spanking c m c l five hundred three one zero one one that's the that's the no fault act that appears to me as a holding of the court it's certainly i don't think would lead to a reasonable conclusion that that's not a holding of the court i would also add that in the flynn auto auction case the footnote is i think the for him in my view the effect of the footnote was just to advise that the parties weren't arguing on appeal that the auto sales exception would apply if you know honest well i think you know if that footnote stood alone you know maybe that would be true but the fact that they right afterwards go say it violated the act and cited the act i think goes further that being said that's your best case is that right no i don't i mean yes i mean i think that kid's auto sales exception what is a better case that's the best that's the best case on that  exception specifically and i frankly think that case really resolves this entire appeal but there are so many arguments that go further than this with respect to the suppose a distinctions between the various exceptions i don't think there's any debate that there's never been a michigan appellate court case that has up held or who was it insured exclusion in the face of a no fault i challenge and moreover your opponent makes this big deal about how individuals are different from commercial and are there any of these michigan court of appeals decisions that say that the exclusion is invalid where it's involving a commercial know there absolutely is and you know that that citizens are sort of the citizens be chrysler decision they were both commercial entities the flint case in federal court those were also commercial entities and frankly the know the big original case the citizens view federated it now it doesn't say doesn't draw a distinction between personal auto policies and commercial auto policies that distinction has never been drawn by any of that presents a strong argument that to predict what the michigan supreme court would do would be that the michigan supreme court will invalidate this provision but then when you get to whether there should be recovery beyond the limits then at least at the court of appeals level as i understand it there's this knowledge except if you assume that there's a knowledge exception which at least there's some support for you would grant then if you assume that there is such a knowledge exception why isn't the absence of a provision other than this footnoted not really argued thing that you've been talking about in that one yeah absolutely and there's a there's a couple reasons one is the martin case from two thousand and eight which is really probably the most detailed recent case discussing the rationale behind voiding who is an  provisions and applying policy limits in that case while they recognize from the previous kurzman case which i'll discuss in a minute it went beyond saying simply that the entire policy limits apply based on some kind of prior knowledge exception it also indicated that based on you know its interpretation of general contract principles by voiding just of the the who is insured the you know the invalid who is an insurer provision the policy limits in the policy remain there was a several position provision that position has been upheld by other courts since that contract interpretation decision and has never been criticized  again moreover in this sort of goes back to i think i guess the idea that there is sort of a a knowledge basis or an idea that imposition of the policy limits is sort of a sanction against the insured for bad behavior and sure for bad behavior i disagree based on the contract principle argument however even then there's two other bases you are when you apply this michigan statute you are you  saying the insurance company have to pay what the literal terms of your contract don't provide that you have to pay no the policy limits under the policy this policy is five hundred thousand dollars so that under the under the literal language of  the policy you don't have to pay anything the only reason you have to pay is because there's a statute out there saying we we place into your policy liability because you're the owner even though you contracted a way that makes sense i  understand what you're saying i mean and the argument right that's the argument and it seems it seems it makes sense to say that the only time that you're going to hold them to something beyond what their polic is that you hold them to the minimum of what the statute requires that it's us well i mean what the minimum of what the statute requires that it says is that up to these certain limits these lower limits you have to it says that the statute shall not require the state you know more than the no fault act doesn't require more than the state policy you know the statutory policy limits that was not now wasn't that was a floor not a ceiling that was just the minimum that a policy needs you to comply with the statute that's what hollers and that's what the statute is as a minimum you don't have to insure beyond the statute beyond the minimum right but what an obligation right but in this case federated got a five hundred thousand dollars policy and that's what the case in a five hundred thousand dollars policy that didn't apply to the owner in these circumstances well it did because under under michigan law that exclusion can bet that exclusion was void so your point is that the exclusion is void and therefore you wipe the exclusion at of the policy and you then say the policy otherwise provides five hundred thousand dollars of coverage that rest of the policy applies right and that and that's what the case law is held to rely on in in the in the court in martin indicated quote the offending provision in the auto owner's policy contained no language indicating that in the event an exclusion was deemed void only the statutory minimum applies we cannot be expected to read into the policy language that it did provide finally if i don't as wanted to limit its coverage to garage customers to the statutory minimum it could have don't it could have done so it chose not to creating an ambiguity at issue which is one of the basis for its imposition of the full sanctions on this apparently this position was also again express the followed by the court in large i would also just add i don't know if you large its two thousand and law three seven six seven eight six i would also add that the court and farm bureau with respect to this knowledge requirement as counsel indicated in that was you know sort of the quote unquote first case so even if any reasonable insurer could sit here and read chrysler and believe that the auto sales exception would survive a challenge under the no fault act which is not something i agree with there's we have a twenty plus years of president denying voiding every single one of these any attempt by any insurer to deny primary religious residual liability coverage on behalf of the owners i and one final note with respect to kurzman and i think it's sort of inherent in council for federated argument that this the imposition of the policy limits is sort of a sanctionable situation hersman does mention sanctions but when it was talking about sanctions it wasn't talking about that before policy limits applied and as a sanction for a once again attempting to enforce a previously voided provision with a court actually said was its continued attempt to enforce an exclusionary provision was sanctionable meaning attorney's fees obviously you know that's not something i've explicitly stated in this case but i think the position that you know this and i also know in that case harvey that it doesn't say when it's talking about this knowledge sort of aspect it's not that you knew the policy provision was going to be void d because it had previously been voided before this if they knew or should have known that this policy provision was going to be forwarded and you know i stayed after you know that the case was all stipes you know it started but like i said in the very beginning i don't i don't believe that there's any reasonable argument that federated could make taking aside chrysler that this provision was going to stand up after all of this case law voiding every single thank you martin is your honor is noted is a court of appeals case it's not a michigan supreme court case the analysis of the court related to the contract occurs after it first rules that we're going to apply the full limit because the customer exception was invalidated in one nine hundred ninety five it's now two thousand and nine you know you can't rely on it so we're not going to let you rely on the mandatory minimums you've got to pay the full limit same thing happened in  march which we mentioned as well which is the two thousand and ten case so you're saying in those cases they relied on the knowledge that that was the primary reason and if it's been so clear for so many years  that everything gets gets gets invalidated then it sure is interesting that the primary case they rely on the chrysler case the mandatory minimum limits were applied there granted again it's only a trial court decision in the verses brennan up held the provision and didn't address the no fault act and so to apply the mandatory limits here if the if the matter if the provision going to be invalidated would be the greatest or worst outcome that could occur because you can't you can't enforce the full policy limits when we have a court of appeals decision that  the provision that's all i have to thank you thank you both for your argument would be submitted