Obviously, you have to sympathize with them. 9 people in 1100 square feet is a lot of people in a small space. That's about 120 sq feet/person, which is a 10' x 12' space. I'm sure this is far from their ideal living situation too.
I'd immediately talk to your insurance about it. If it voids your insurance, that's, unfortunately, a big no for the ongoing rental. Renting a place without insurance can lead to a disaster for both the landlord and the tenant. If a serious injury or a fire arises from having all those people in there, then you're looking at potentially losing everything you have, and the tenants potentially being unable to recover for their injuries.
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