Can someone enlighten me as to whether the Insurers are likely to pay out given what has all the hallmarks of grave Gross Misconduct by the crew.
I am not an expert, but I think it's almost certain that the insurance company will pay out. Typically an insurance company can't refuse their liability to a third party, but they can seek to recover that from the insured in the event that negligence is the cause.
If an insurance company (actually, the underwriter whether that's a name, another insurance company, or the Government as last resort) is unhappy with the potential risk then it's their problem and their responsibility to either ensure the problem is fixed or deny cover in the first place, at which point the airline wouldn't fly.