What does directors and officers (DandO) liability insurance protect against?

Directors and officers (D&O) liability insurance is specifically designed to protect the personal financial interests of corporate directors and officers from legal actions that may arise due to the decisions they make while serving in their capacities. This type of insurance covers legal defense costs, settlements, and other expenses tied to claims of wrongful acts. These wrongful acts could include allegations of mismanagement, breach of duty, neglect, or failure to comply with regulations, among other accusations targeting their decisions in the governance of the company.

Thus, when directors and officers face lawsuits concerning their actions, D&O insurance provides the financial security needed to cover those potential personal financial losses, thereby encouraging effective leadership without the fear of personal financial ruin resulting from legal challenges.