Cover under the primary layer of insurance - issued by Chartis Australia to cover Gunns, Gunns Plantations Ltd and directors - had been exhausted, so the group of growers proceeded against the next layer of insurance from Catlin Australia, now AXA, and Chubb Insurance, to attempt to recover losses.

The matter was determined in the NSW Supreme Court last week, in which Justice Michael Ball allowed the claim to proceed and ordered AXA and Chubb to pay costs, given they opposed the action from the growers.

The action was led by Giabal Pty Ltd and Geoffry Underwood as representatives of growers with an interest in one or more of the six woodlot managed investment schemes.

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As part of the insurance policy, AXA and Chubb had agreed to pay losses that arose from a "wrongful professional act" or "wrongful managerial act".

It was alleged that between 2002 and 2011, Gunns Plantations Ltd advanced about $486 million to Gunns from money it held on trust for growers, court documents show. GPL was also alleged to have paid $118 million in dividends to Gunns between 2004 and 2009.

AXA and Chubb argued that leave to add them as defendants in the action should be refused on the basis of a conflict of interest exclusion and a lenders liability exclusion.

Justice Ball said that the alleged actions of GPL directors could constitute a conflict of interest in that they "preferred the interests of Gunns over those of GPL", but this was difficult to determine.

"One difficulty with that contention is that it is not obvious what the conflict of interest is that caused the payments to be made," he said.

"It is even less clear how the lenders liability exclusion applies.

"I am not satisfied on the basis of the material currently before the court that the insurers are entitled to disclaim liability. No other ground was advanced for refusing leave to proceed against the insurers."

The growers were given leave to file and serve further summons and a further amended commercial list statement.