The current, public version of Papers does not support Microsoft Word 16.9.
We have just released an update to Papers 3 to resolve this and other issues. It is currently only available in our beta channel but you can get access to it immediately The update will be released publicly soon.
We have gotten reports of this update causing crashes on machines running OS X 10.10.5. Please only do this if you're running OS X 10.11 or above.
To do this, please launch Papers and head into Preferences. Once there, you'll see an option near the bottom to be informed about pre-release and beta versions of Papers:
Once you do this, quit Papers, re-launch it and that update will be available to you.