Why EB-5 Regional Center Insurance Should Never Be an Afterthought
Many EB-5 Regional Centers understand the importance of Regional Center liability insurance.
They realize that even with the best contracts and the most conservative projects, allegations of wrongdoing can be made, can be very costly to defend, and could lead to a prohibitively expensive settlement or judgment. In the worst cases, the costs to defend or settle a claim made against the Regional Center could damage its ability to continue operations.
Regional Centers that purchase coverage – and do so before launching their first capital raise or receiving their first I-526 or I-829 responses – enjoy the following advantages:
When purchased for the first time, a policy will exclude any claims arising from “circumstances” known of prior to the issuance of coverage.
This makes waiting to purchase coverage after launching your first offering or, at the very latest, after your first I-526 response a very dangerous game. Why? Because any claim against you could fall into those “circumstances” you knew about before purchasing a policy.
Purchase coverage prior to your first offering, however, and you won’t have to worry about this potentially damaging exclusion. There won’t be any “circumstances” for you to have known about and you’ll be covered for any substantial damages arising from a potential lawsuit.
2. Coverage for “acts” performed prior to a first capital raise
Sometimes, it’s not possible to cover a Regional Center for certain “acts” which took place prior to the purchase of coverage. Examples include the vetting of a project, structuring of an offering, reporting/filing with the USCIS, certain capital raise activities, etc.
Regional Centers that purchase coverage prior to the first capital raise, however, don’t have to worry about this issue. They’re covered for these “acts” by virtue of the fact that they purchased coverage before the “acts” occurred. Those who wait, however, are rolling the dice.
Delaying the purchase of coverage until after a first capital raise, could result in a claim denial if said claim alleges negligence or misconduct in the “acts” performed prior to coverage implementation. Even if the allegations contained in the claim are frivolous, a denial could leave you on the hook for legal defense fees you can’t afford.
For these reasons, it’s imperative that Regional Centers purchase coverage prior to launching their first project. That goes for Regional Centers following a “traditional” approach as well as entities contemplating “rent-a-center” arrangements in which the sponsored party will need to carry insurance.
Waiting to purchase a policy could have serious consequences. The best way to find the appropriate coverage is to connect with a broker who understands both the EB-5 Visa Program and specialty insurance products for EB-5 Regional Centers.
Contact David Souders today for more information about EB-5 insurance products.
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