You know, if I were the insurance company - and I seldom side with insurance companies - I'd refuse to pay. If the promoter was operating outside of the terms of the contract with the BLM, then he was likely operating outside the terms of the insurance contract for the event.
Unfortunately, at $1 Million, it's probably cheaper for the insurance company to pay it than fight it.
As to the BLM - If I were the ranger on duty and was outnumbered to that extent - well over the numbers agreed to by the promoter - I would have shut it down. Law enforcement routinely turns people out of crowded nightclubs and venues when they've reached capacity. It was the ranger's right and duty to do so. As a sworn officer and an employee of the BLM, it DOES fall to them.
As to the idiots standing that close to the racing - my sympathies to the families - but they were idiots standing TOO CLOSE TO THE RACING.