Directors and officers insurance coverage came into being as our country became more and more litigious. Corporate directors and officers found themselves more and more at risk for being sued for such things as securities fraud. They may not be guilty but they will still have to have a lawyer to fight the charges. They could also be sued by disgruntled shareholders that feel like they have mismanaged the company and cost them money. A director or officer could also find themselves facing U.S. Department of Justice indictments. They can also be accused of unfair employment practices.
Having directors and officers insurance coverage will help to offset the legal fees that it will take to defend any of these charges. Our society has become hypersensitive to even an allusion that the head of a company has been involved in somehow lying, cheating, or otherwise not been honest with employees or shareholders. Often a person will not consider taking a position with a company unless they have directors and officers insurance coverage in place.
There is no standard directors and officers policy. Each policy is tailored to the specific needs of a particular company. What will be covered and what will be excluded from coverage will be spelled out clearly in the policy. You need an insurance agent that is familiar with these types of specialized coverages to make sure your company is adequately covered.