What types of risks are associated with "directors and officers liability insurance"?

Directors and officers liability insurance specifically addresses risks that arise from management decisions and actions taken by corporate leaders. This type of insurance is designed to protect individuals in executive positions from claims related to wrongful acts in their capacity as directors or officers. Such claims may include breaches of fiduciary duty, mismanagement, or violations of regulations, all of which can lead to legal action against them personally or against the company.

In contrast to other types of risks, such as those involving employee misconduct, property damage, or natural disasters, which are covered by different types of insurance policies, directors and officers liability insurance is uniquely focused on the responsibilities and decisions of the company's leadership. This makes it critical for organizations, as it safeguards not only the individuals involved but also helps to attract and retain qualified executives by providing them with necessary protection against potential legal actions.