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State Street: A fine line on violations to liquor-license holders

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Dale Florio, who represents the restaurant association, says letting the state levy fines is critical to avoiding 'politically motivated prosecutions' that could give towns far greater power to close businesses.
Dale Florio, who represents the restaurant association, says letting the state levy fines is critical to avoiding 'politically motivated prosecutions' that could give towns far greater power to close businesses. - (Aaron Houston / NJBIZ)

The New Jersey Restaurant Association is working to fight off S-834, which would give municipalities the right to assess fees on liquor-license holders charged with violations.

Under current law, municipalities can suspend the licenses of restaurants, bars or liquor stores. If the suspension is appealed to the Division of Alcoholic Beverage Control, the agency can replace the suspension with a fine. But that fine goes to the state, not the municipality. The only way the municipality can recover its enforcement-related administrative costs is through annual license fees, which already are stretched to cover costs associated with licensure.

S-834 would change that. If enacted, the law would let municipalities assess fees to cover court costs and other administrative fees after holding a disciplinary hearing or settlement with a licensee.
NJRA President Marilou Halvorsen said the law is written so broadly, it would give municipalities leverage to impose fees even for minor violations.

“So that could be anything from the most minor of violations,” she said. “All of a sudden you’re allowing a municipality to give them a fine or possibly close them down and force them into settlement.”
Michael Cerra, senior legislative analyst with the New Jersey League of Municipalities, said such concerns are overstated.

“The towns that are looking to do this are dealing with major violators or frequent violators,” he said. “If the point is to be more effective in enforcement and promote retail and economic development in your community, going after minor violations doesn’t really serve the long-term purposes.”

Cerra also addressed another criticism of the bill — that it’s a thinly veiled attempt to help ailing municipal budgets. “This predates the recession,” he said. “This predates the cap” on municipal tax increases.
Dale Florio, a lobbyist at Princeton Public Affairs, said he’s also worried the bill could empower politically motivated action.

“There’s a reason why ABC is the one responsible to levy fines,” said Florio, who counts the restaurant association as a client. “It takes it out of local jurisdiction and helps avoid what I would call politically motivated prosecutions.”

The bill’s primary sponsors are Sens. Joe Vitale (D-Woodbridge) and Jim Whelan (D-Atlantic City), both former mayors. One of the co-sponsors, Sen. Brian P. Stack, is the sitting mayor of Union City.

Bill could present big headache to insurers

A proposal set to go before the Senate Commerce Committee on March 4 would give consumers new avenues to sue insurers, but opponents fear it could prove a headache for anyone who pays a premium.

The bill, S-2460, is dubbed the "Consumer Protection Act of 2012," and is sponsored by Sens. Nicholas P. Scutari (D-Linden) and Jennifer Beck (R-Red Bank).

Currently, the power rests within the Department of Banking and Insurance to go after insurers who have a pattern of engaging in unfair practices. If the new bill is enacted, consumers could take private causes of action if they believe their insurer acted unfairly, regardless of any action taken by DOBI.

Marcus Rayner, executive director of the New Jersey Lawsuit Reform Alliance, said the bill could open the floodgates to insurer lawsuits.

"The way this bill is crafted, every claim dispute between a customer and an insurance company is likely to result in a bad faith claim," he said. "And those litigation costs are going to be borne by New Jersey consumers in higher insurance premiums."

This isn't the first time such a law has been put forth in New Jersey, but similar bills in past years never gained much momentum. That could change in the wake of Hurricane Sandy, however, as thousands of homeowners are dealing with insurance claims.

In announcing the bill, Scutari said any unfair practice by an insurance company is too many.

"Providing a method of recourse for those who are treated unfairly by their insurer, whether or not the company has made these tactics a long-standing practice, will better protect our residents and help hold insurance companies accountable," Scutari said, in a press release.

If customers are successful in their lawsuits, insurers could be made to pay damages in excess of the coverage limits of their policies, and punitive damages of up to five times the compensatory damages, plus interest.

The law would retroactively take effect on Oct. 1, 2012, so Sandy claims would be covered.

Rayner said he hopes lawmakers don't move forward. He said two states that enacted similar changes, West Virginia and California, later reversed themselves.

Hospital pilot program has industry's attention

A proposed pilot program that would charge hospitals fees to boost federal Medicaid matching funds has the industry's attention.

The bill, S-2466, was introduced last month by Senate Budget Chair Paul Sarlo. If enacted, it would establish a five-year local hospital fee pilot program, in which seven cities or counties could levy fees on general hospitals within their jurisdictions.

The new fees would go to the state Department of Human Services, which could then leverage the money to increase federal Medicaid matching funds. The money would then be used to support safety net hospitals and managed care organizations within the local jurisdiction.

Randy Minniear, senior vice president of government relations and policy at the New Jersey Hospital Association, said the industry is definitely in favor of maximizing the amount of federal dollars the state receives.

"That premise itself is something we've supported in the past," he said.

But Minniear said he has concerns about the bill. For one, it doesn't limit how much of the new fee a local government can keep for itself, potentially creating an incentive for local governments to use the fees as local revenue raisers.

Minniear said there also are questions about how the government's switch to a managed-care model would affect the flow of money. He also wants to make sure as much money as possible flows to the hospital industry, rather than getting caught in insurance administration fees. He said the bill should have language that would end the program if Washington nixes the incentives underlying the pilot program.

Minniear said he's met with Sarlo, and is encouraged by those talks. The bill has yet to be scheduled for a committee meeting.

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