In order to take advantage of recent spurts of new contract opportunities in certain regions of the United States, many small and midsize construction contractors are finding themselves forced to submit bids for work in states far afield from their usual zones of operation, construction risk management experts said.

While the proliferation of small and midsize contractors into unfamiliar geographic regions is vital to the overall health of the construction industry, a small or mid-market construction firm choosing to explore contract offers in states hundreds of miles from their own must recognize the litany of legal and financial exposures that await them, experts said.

Regulatory risks, supply chain and staffing issues, cost overruns and other unforeseen complications can seriously jeopardize the safety of a contractor's workers, the viability of the project and, in some cases, the very solvency of the contractor, experts said.

“I see it as knowing the difference between recognizing the situations in which you actually have the expertise needed, as opposed to just needing the job,” said Scott Rasor, the Chicago-based president of Zurich North America's construction practice.

In the first place, contractors will need to appreciate the many legal and regulatory differences between states in terms of insurance laws, workplace safety standards, litigation trends and commerce laws, Mr. Rasor said. Labor workers compensation laws in New York and California have had drastic firming effects on insurance availability for projects in those states, as have recent natural catastrophes in Texas, Louisiana, Colorado and Florida, to name a few.

Most states also have their own set of occupational health and safety regulations, as well as standards for negotiating with union tradesmen.

“You have to either know that ahead of time or partner with another contractor with experience in the region,” Mr. Rasor said. In New York City, he said he and his colleagues at Zurich have observed firms experience significant frustration when it comes to availability of contractor insurance for anyone working from heights that would be subject to state laws that allow workers to file for workers compensation and sue their employers for negligence.

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“A lot of insurers have taken some different approaches to that. Ours is to underwrite and price the risk appropriately, but a number of other companies have chosen to exclude the risk altogether or they've decided to stay away from certain classes of business so they don't have the exposure.” Mr. Rasor said.

Though a majority of states have made strides in the past several years to improve the portability of construction companies' own contract offers to subcontractors, experts said some states still have not settled within their own judiciary certain insurance terminology and liability assignments, including anti-indemnity applicability and the issue of what exactly constitutes an “occurrence.”

“Really, what you have is a handful of states that remain difficult because they've interpreted it differently than the majority of other states,” said Paul Becker, the Nashville-based chairman of Willis North America's construction practice. “There's a lot of uncertainty in states like Pennsylvania and Texas regarding this, and it's a big deal for contractors. It's an area that remains unresolved in my mind, and remains an area that needs to be focused on.”

Beyond jurisdictional issues, there exists a wide range of potential exposures brought on by a fundamental unfamiliarity with a state or region's physical and environmental particularities. Variables such as pollutants entrenched in a region's soil or groundwater, geological signatures such as shallow bedrock or landfill erosion, even the mineral composition of the soil itself can wreak havoc on a construction project's pacing and cost-containment strategies, if left unaccounted for.

“If you want to come and build a 20-story building in Boston, you're going to encounter much different site conditions than you would if you were building the same 20-story tower in Buffalo,” said Steve Healy, senior underwriting manager at Boston-based Liberty International Underwriters, a unit of Liberty Mutual Insurance Co. “If you're not aware of all of that going in, it's just one more barrier to success on a project.”

As contract opportunities begin to open in major cities such as New York, Chicago and Miami, companies accustomed to working in rural areas can and often do struggle to account for the considerable logistic challenges moving large equipment through narrow congested spaces, surrounded by literally thousands of people, every one of them a potential third-party injury claim.