I really don't think this is anything to do with a passenger being allowed to touch the controls; it is about a pilot who is not on the insurance being allowed to fly a syndicate aircraft for which he was not insured. A bit like letting someone drive your car without being insured. The outcome is fairly obvious. No doubt there was intent prior to departure.
Allowing someone to operate the controls does not make them a pilot, they remain a passenger, any instruction given to them by a non instructor means they are not even a student pilot. Two factors need to be considered here; the pilot remains responsible for the safe operation of the aircraft and must not let the passenger do anything that might place that in doubt. If something happened that occasioned the requirement for insurance, did it have anything to do with the passenger touching the controls, if so then you have overstepped the mark and if not how would anyone ever know? I have seen passengers hang onto the control column when trying to adjust their seat, I believe there was a PA28 accident a few years ago involving exactly that. In any event this should have been included in the passenger brief.
Letting a passenger handle the controls is not the same as leting another pilot fly the aircraft. The latter is a much more risky business especially for the inexperienced and in particular when only named pilots are covered by the insurance.