Does drywall surrounding breaker panel pose fire risk?
You're going to need to unmount this box and move it forward slightly, because there's no other way out of this situation
The root cause of your issues is that the drywall was inserted as an (improper) &quot;shim&quot; to work around the fact that your breaker panel was mounted too deeply into the wall.  You see, not only does the current situation violate NEC 312.4 due to the hole in the top left by the missing drywall, but most plug-on breakers rely on the cover at least somewhat to prevent breakers from &quot;tipping&quot; out as Harper illustrates (the friction of the jaws on the stab also helps retain the breaker, but putting forces on that isn't good for the electrical contact surface there).  Furthermore, whacking a replacement surface mount cover on the box is no good because that causes the finish surface of the wall to infringe on the NEC 110.26(A) clear working space of the panel, even if you were OK with living with the finish issues a surface mounted enclosure poses when mounted in a finished wall.
So, you'll need to have your electric utility kill power at your meter to let you adjust how this panel's mounted; fortunately, most power companies can do that for free these days as long as you call within normal business hours, thanks to the rise of smart meters.  Once the power's off, you can then remove the existing mounting screws, slide ½&quot; plywood shims behind the panel, then screw the panel back in through the shims so that it sits flush with the finish wall.  With that out of the way, you can mount the flush cover back to the box and have it mostly corrected, although there is merit to patching the hole above the box once you have it moved forward to the correct depth.