Geez, I must live right ,or dodged bullets somehow, not being in that situation. But it can definetely happen to anyone, anytime.
I could consider adding some type of disclaimer to my proposal. Like...In the case of unforseen situations , additional material and labor will be at the customer's expense. BUT, as a customer the red flag would probably go up.

I would imagine depending on the situation also. If the customer is saying "I dont have the money right now". Then I would offer to take payments. If the customer's saying "I'm not spending any more money". Your between a rock and a hard place, if there's nothing in writing.

As far as, "The job was scheduled to be done in 3 days". Well, that's being unreasonable. This situation is out of the installer's control. Everone's schedule gets shifted around all the time due to unforseen circumstances, or due to flakes. Unfortunately we're usually one of the last trades, so the time crunch is on. But obviously it's more important that the floor is done right, bump other trades off a couple days. We do all have unreasonable customers now and then, as in any business.

So far I've not had a problem in disclosing beforehand that this proposal does not take into account any hidden damage or defect that may get uncovered. If the client were to balk at that, we would not have an agreement to proceed.

That's great but still doesn't answer the question. I do the same. My proposals clearly state what is included and what is not included ( major subfloor and/or substrate repairs ). The doesn't solve the problem when the client says," I'm not paying for the repairs." Then either you:

1) fix the problem on your dime ( a couple of hours? no problem! all day? , there's a problem )
2) do your best and cross your fingers. Hope you don't get a call back.
3) walk away, pissing off the customer and general contractor, who has given you many referrals in the past. And risk a court battle.
4) get a waiver signed, disclosing the problem fully, with the customer accepting full liability and responsibility for the performance of the floor.

I choose option 4.

I'll go with #4 also, but each scenario is different, I walked on a job a few months ago because the GC thought I should pay for leveling out of my pocket. He said the subfloor was fine but when I got to the job it needed a fair amount of leveling. I figured $400.00 in patch plus a days labor. He didn't want to go back to the customer and thought I should eat it in order to get the $3,000.00 job yeah I could have absorbed it but as I told him I don't do anything for free. And this was I contractor I did maybe a dozen jobs a year for.

Not once in 14 years have I experienced that. That goes for tile floors, showers, hardwood, laminates or stairs.

Waivers are out of the question for me, same goes for running the risk of installing anything over a bad situation. Also I don't work for contractors, save two, who I know very well.

It took me 18 years to get into that situation so you should be safe for another 4.

One never knows ....

As I said earlier, we advise our clients at the time of measure, and site inspection that there MAY be extra charges if the subfloor is not available for us to evaluate at time of measure. In general they agree because the have been pre-advised. rarely have I had to pick up the cost of repairs, but I will do that if the client balks at the cost. Not so if there are structural repairs to be done though.
Mentioning a waiver to an un-educated (in flooring) client usually sets off alarm bells in their mind and doesnt amount to a hill of beans in court anyway, at least not up here.

Most of you guys are self-employed (or so I believe) so the situation is different than it is for me. I cannot understand, since you are paying yourself, why it is a big deal to reduce your labour payout to yourself, and level or fix the dang subfloor if the client cant or wont pay the upcharge. Again, I mean if it is just a couple hours or so.
And Im not talking about every job, most clients I am sure, are happy to throw in a few bucks extra if it means the job is done right.

Admittedly, it doesn't come up often, but it does happen. At least three times I can recall in the last four years or so.

1) Contractor hires me to do a fairly large site finished floor. Says everything is fine. I do inspect the site a month before delivery. Everything checks out. I arrive at the time of flooring dilivery and inspect the site again. This time, my moisture meter is reading high subfloor MC. We pull a subfloor panel to inspect crawl space. It's flooded under 6" of water; the entire area. Cause unknown but I suspect clogged drain lines from downspouts. I inform the GC, who agrees this is a mess. I suggest waiting. Customer is informed of the situation but says they cannot delay. I say pump out the water, put fans below, check and fix drains and/or drainage. Client declines. I say I will not be liable for the installation and I need a waiver. Both the GC and customer sign the waiver.

2) Customers slab is covered with carpet. I bid the job tight money wise as the client is shopping me. GC pulls up carpet and I discover all the slab needs grinding and floating. I include scraping the slab clean at no charge, as is customary. Grinding and floating 500 sq.ft. of slab will take a minimum of 8 hours labor plus materials. I inform customer of this. They say, "I have no money left for this. Do the best you can." I say, " I need a waiver, to ensure you'll not come back after the fact and try to get money off your bill because the floor has hollows in it." She agrees to sign the waiver.

3) I do a large install and finish job on a big remodel/addition. The customer, after the contract is signed, insists that I perform structural repairs to the subfloors, which are wood. I say it will cost extra. He says it should have been included. I disagree and show him the contract specifies substrate repairs are additional and may be needed. As it is, I disagree the substrate really needs fixing but he is listening to his foreman, who says it does. I say, " I'll do whatever you want, but not for free." We come to an agreement that I'll warranty the work/floors ( as I always do anyway ). He tries after the job is done to take away money for me not fixing his subfloors. I lien his house. It took six months to get paid.

The last guy was my CPA for 15 yrs. Not anymore. So the moral of the story? Stuff happens. But I will NOT work for millionaires or folks making ten times what I do for free. I do plenty of free stuff for customers already. Those that stuff doesn't happen to? Well, your time hasn't come yet. Be prepared for when it does.

Ya Gary, I know exactly how you feel. When we are working for a home-owner, we usually do as I said earlier. AHHH but working for a GC? No way Jose, Our contract is specific about this: " To supply and install new flooring, as specified, over subfloor prepared by others"
In this case, the "others" is the GC and I make it very clear that we are not responsible for anything that can be attributed to subfloor deficiencies.
We have good relationships with MOST of the contractors we work with, dating back over 30 years in some cases; and they know what we expect to find when the crew arrives, so no problem there. Also, we no longer quote to contractors that we have no work history with, and when we DO have to work with a GC we are unfamiliar with, our contract is issued to the home-owner.