I was able to get it work with Saxon see below code. I think the key was the document.getDocumentElement() as parm
public String transformResultXML(String xmlSource, Templates xsl,String policyXml ) {
String result = "";
try {
StringWriter writer = new StringWriter();
StringReader reader2 = new StringReader(policyXml);
DocumentBuilderFactory dfactory =
DocumentBuilderFactory.newInstance( "com.icl.saxon.om.DocumentBuilderFactoryImpl",null);
dfactory.setNamespaceAware(true);
DocumentBuilder docBuilder = dfactory.newDocumentBuilder();
org.w3c.dom.Document document = docBuilder.parse(new InputSource(new StringReader(xmlSource)));
Transformer transformer = xsl.newTransformer();
transformer.setParameter("RsXml", document.getDocumentElement());
transformer.setOutputProperty(OutputKeys.INDENT, "yes");
transformer.transform(new javax.xml.transform.stream.StreamSource(reader2),
new javax.xml.transform.stream.StreamResult(writer));
result = writer.toString();
System.out.println(result);
} catch( Exception e ) {
e.printStackTrace();
}
XSL snippet
<xsl:param name="RsXml" />
<xsl:template match="/policy/vehicles">
<xsl:for-each select="$RsXml/InsuranceSvcRs/com.csc_PolicyOrderCurrentCarrierInqRs/PersVeh">