The Dram Shop Act v. Automotive Insurance Reform: Will New Jersey's Dram Shop Act Continue To Serve as the Superior Statutory Authority Regarding Liquor Liability in the State of New Jersey?

New Jersey – Dram Shop

On July 8, 2010, the Supreme Court of New Jersey granted a defendant liquor licensee leave to appeal the New Jersey Appellate Division's decision in Voss v. Tranquilino, 413 N.J. Super 82, 992 A.2d 829 (App.Div. 2010), in which the Court held that an individual who is convicted of, or pleads guilty to, driving while intoxicated is not barred from bringing a dram shop claim for damages against the establishment that had served the individual alcohol prior to his or her accident.

The underlying Appellate Division opinion came in response to the latest in a series of cases involving N.J.S.A. 39:6A-4.5(b), a motor vehicle statute which bars individuals guilty of driving while intoxicated from bringing suit for losses sustained as a result of their underlying alcohol-induced accident. The bar on such claims was introduced in 1997 as an amendment to N.J.S.A. 39:6A-4.5 of the New Jersey Automobile Reparation Reform Act, which was precursor legislation to New Jersey's current Automobile Insurance Cost Reduction Act ("AICRA"). The 1997 amendment was intended to reduce or stabilize the cost of automobile insurance that had been on the rise as a result of increased insurance fraud at that time. N.J.S.A. 39:6A-4.5 focused on three areas of reform: (1) deterrence of drunk driving; (2) deterrence of the use of automobiles as weapons; and (3) deterrence of the operation of uninsured vehicles.

In Voss, an individual who pled guilty to driving while intoxicated attempted to bring suit against the restaurant that had served him alcohol on the date of his driving while-intoxicated-induced accident, claiming he had been served alcohol while visibly intoxicated in violation of N.J.S.A. 2A:22A-1 to -7, otherwise known as New Jersey's "Dram Shop Act." New Jersey's Dram Shop Act stipulates that a licensed alcoholic beverage server can be held liable in negligence when the server serves a visibly intoxicated person under circumstances where the server knew, or reasonably should have known, that the person served was intoxicated. The defendant restaurant moved to dismiss the plaintiff's complaint based upon the bar on claims by those guilty of driving while intoxicated pursuant to N.J.S.A. 39:6A-4.5(b). Although the trial court initially denied the motion, the decision was reviewed de novo by the Appellate Division. After reviewing the underlying legal arguments, the Appellate Division held that the automotive insurance reform statute N.J.S.A. 39:6A-4.5(b) did not bar a dram shop claim against the liquor licensee that had served the plaintiff alcohol prior to his accident.

On appeal, the Appellate Division was asked to reconcile whether the statutory ban on actions by individuals who were either convicted of, or plead guilty to, driving while intoxicated pursuant to N.J.S.A. 39:6A-4.5(b) somehow overrides an individual's right to bring a dram shop claim if the individual bringing the claim had been convicted or pled guilty to driving while intoxicated. The Appellate Division held that N.J.S.A. 39:6A-4.5(b) does not bar a dram shop claim for three reasons. First, the court explained that the legislative purpose behind N.J.S.A. 39:6A-4.5(b) was to reduce automobile insurance premiums. The court reasoned that legislative policy should not extend its scope beyond the motor vehicle statutes outlined in Title 39 of the New Jersey Annotated Code. Second, the court felt that barring dram shop claims under such circumstances would constitute an unjustified repeal by implication of New Jersey's Dram Shop Act. The court reasoned that, absent clear and compelling legislative intent, it would be improper to override an individual's ability to bring a dram shop claim. Third, the court felt that immunizing liquor licensees under such circumstances would go against the state's strong public policy against drinking and driving.

The Appellate Division's holding in Voss is of interest because the public policy behind both the Dram Shop Act and N.J.S.A. 39:6A-4.5(b) was to lower insurance premiums. In the New Jersey Legislature's initial statement of legislative findings and declarations on the Dram Shop Act, the Legislature acknowledged the need to enact measures to make liability insurance coverage for liquor licensees more available and more affordable. It also indicated the Legislature's hope that the Act would result in the improvement of the alcoholic beverage liability insurance market in New Jersey. Insurance companies, the Legislature rationalized, would be more inclined to offer favorable policies to liquor licensees if the limits of civil liability were better defined and, thereby, the potential incidences of liability were more predictable. By clearly indicating the liability of liquor licensees for serving visibly intoxicated individuals, it reasoned, less expensive insurance policies could be drafted with this risk in mind. N.J.S.A. 39:6A-4.5(b), on the other hand, was enacted ten years after the Dram Shop Act in an effort to reduce and stabilize the cost of automobile insurance premiums.

The Appellate Division's decision in Voss was not the first time that N.J.S.A. 39:6A-4.5(b) has had to take a backseat in light of conflicting public policy provisions. In 2002, the Appellate Division held in Camp v. Lummino, 352 N.J. Super. 414, 800 A.2d 234 (App.Div. 2002) that an underage plaintiff was not barred under N.J.S.A. 39:6A-4.5(b) from bringing suit against the social host in whose home he had been drinking before his automotive accident. Three years later, in Walcott v. N.J. Ins. Co., 376 N.J. Super. 384, 392, 870 A.2d 691 (App.Div. 2005), the Appellate Division also declined to apply the bar to the recovery of PIP benefits by drunk drivers.

In the wake of the Appellate Division's decision in Voss, it became questionable whether N.J.S.A. 39:6A-4.5(b) would ever be an effective defense to bar liability in any context outside of the motor vehicle liability arena. Now that New Jersey's highest court has agreed to make a determination as to the applicability of N.J.S.A. 39:6A-4.5(b) in relation to a dram shop claim, it seems the time has come to find out whether New Jersey's Dram Shop Act, and the state's strong public policy against drinking and driving, will continue to serve as the superior statutory authority regarding liquor liability in the state of New Jersey.

* Bob is an associate in our Roseland, New Jersey, office. He can be reached at (973) 618-4157 or radiehl@mdwcg.com.

Defense Digest, Vol. 16, No. 3, September 2010