Directors and officers (D&O) or management liability insurance policies typically provide coverage for claims arising out of wrongful acts committed by directors or officers (and often also employees) in their role as directors or officers of the insured entity—that is their insured capacity. The insurance contract typically makes this insured capacity limitation clear through either the definition of wrongful act or through an exclusion.

For example, the D&O policy coverage grant may be limited to loss resulting from claims arising out of a wrongful act—and wrongful act may be defined to include only those acts, errors, omissions or breaches of duty committed by an insured person in their capacity as a director or officer (or employee) of the insured entity. In addition, the scope of coverage may also include claims made against the director or officer because of his or her status as a director, officer or employee of the insured entity.