Thats pretty discouraging, since subcontracts (in a different industry) is my business, too.
Whats a formal agreement worth if the final judgment is dependant entirely upon what some gereatric jurist had for breakfast?
Furthermore, we require the subcontractors to carry insurance also. Nevertheless, sometimes the subcontractor will make a few payments on the his insurance and stop further payments, leading to a situation where he can show me a piece of paper claiming he has insurance when he does not.
It's frustrating, but it's part of the risk of doing business.
In order to further protect ourselves, the original general contractor was broken up into three different companies. In case one those companies has to go under due to a large adverse judgment, at least the remaining other companies that can provide some help to start over.