Opinion ID: 1347911
Heading Depth: 3
Heading Rank: 1

Heading: For Covered Autos.

Text: b. Anyone else is an insured while using with your permission a covered auto except:    (3) Your customers, if your business is shown in ITEM ONE of the declarations as an auto dealership. However, if a customer of yours: (a) Has no other available insurance (whether primary, excess or contingent), he or she is an insured but only up to the compulsory or financial responsibility law limits where the covered auto is principally garaged. (b) Has other available insurance (whether primary, excess or contingent) less than the compulsory or financial responsibility law limits where the covered auto is principally garaged, he or she is an insured only for the amount by which the compulsory or financial responsibility law limits exceed the limits of his or her other insurance. In a sentence, Federated's insurance policy provides primary residual liability coverage only if the driver of a covered vehicle is uninsured or underinsured. In all other circumstances, Federated completely denies residual liability coverage for losses arising from the use of a covered vehicle. This Federated cannot lawfully do because the no-fault act clearly directs that a policy sold pursuant to the act must provide residual liability coverage for use of the vehicle insured. Notwithstanding the no-fault act, Federated urges us to focus on the financial responsibility act and contends that the exclusion of coverage contained in its policy is authorized and contemplated by the financial responsibility act. In particular, Federated relies on subsections (i) and (j) of the financial responsibility act, MCL 257.520; MSA 9.2220, which provide: (i) Any motor vehicle liability policy may provide for the prorating of the insurance thereunder with other valid and collectible insurance. (j) The requirements for a motor vehicle liability policy may be fulfilled by the policies of 1 or more insurance carriers which policies together meet such requirements. According to Federated, because in each of these cases the driver's insurance policy, when taken together with Federated's insurance policy, will afford benefits of an amount specified by law, its insurance policy complies with public policy evidenced by the financial responsibility act. We question the premise of Federated's argument because it suggests that the financial responsibility act manifests the controlling public policy of this state concerning automobile insurance. The no-fault act, as opposed to the financial responsibility act, is the most recent expression of this state's public policy concerning motor vehicle liability insurance. Therefore, while Federated's insurance policy might well be reconciled with the financial responsibility act, its failure to comply with the no-fault act nevertheless renders it violative of public policy. An insurance policy that is repugnant to the clear directive of the no-fault act otherwise cannot be justified by the financial responsibility act. Our conclusion does not render the financial responsibility act meaningless. To the contrary, the financial responsibility act continues to present legitimate methods by which vehicle owners may satisfy the insurance obligations created by the no-fault act. Subsections (i) and (j) of the financial responsibility act provide a method by which an owner may allocate insurance costs among various policies that he may have purchased for a particular vehicle. Likewise, under subsections (i) and (j), multiple owners of the same vehicle may allocate the cost of insurance among their individual policies. However, neither subsection (i) nor subsection (j) of the financial responsibility act permits an insurer, such as Federated, to circumscribe the coverage directed by the no-fault act; to reach that conclusion would not accord proper deference to the policy judgment implicit in the Legislature's decision to require owners and registrants of motor vehicles to obtain insurance for the residual liability arising from the use of their vehicles. See MCL 500.3101; MSA 24.13101.