Typically, in a cost-plus compensation model, an owner pays a general contractor for all of its allowed costs, and an additional percentage for profit.
Within those costs, there are usually insurance costs and subcontractor costs. Subcontractor costs also often include insurance costs, whether the subcontractor provides that level of detail in their billing or not. At the time of the billing, no one disputes that these are valid costs under the cost-plus contract. However, general contractors and subcontractors may be vulnerable to claims from project owners when those contractors utilize some form of self-insurance or large-deductible insurance coverage on a cost-plus contract project.
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