General liability insurance audit for contractor

I have a contractor who does construction management work and gets reimbursed for general conditions. My client incurs the cost and includes the expenses as direct costs. They invoice their customer for their fee as well as the reimbursed costs. My question relates to the reimbursed expenses. Are they included in sales and subject to general liability insurance or do they reduce the direct costs as it's a reimbursement?

Corp or Individual? I would net the reimbursements with expenses and report consistently for insurance, tax return, and financial statements.

If it's an individual, I would check to make sure 1099 matching makes sense.