“There are plenty of insects protected by either the Endangered Species Act or various state environmental agencies. Most of these species are butterflies, but one very controversial listing is the federally endangered Dehli[sic] Sands flower-loving fly (which looks quite a bit like a horsefly). This fly is native to Southern California and its presence has stopped the development of several structures, including a hospital.”
The Delhi Sands Flower-Loving Fly did not in fact stop the hospital. I’ve seen the hospital, and the patch of dunes across the street from it, that has what may be the only viable remaining population of this fly. All that happened was that the hospital had to be moved a few hundred feet, but that naturally required that a ton of blueprints and such had to be thrown out the window, which is why it cost so much money. The fly will probably be extinct within 20 years, as the developers get bolder in their challenges - including things like letting sheep loose on the property to defoliate it, or plowing it when no one is watching. Then they simply dare the Fish & Wildlife Service to try to prosecute them - as if the USFWS had that kind of money for lawyers.
“If it is illegal to kill the butterflies, what about the caterpillars?”
It should also be illegal (goodness only knows why - the Monarch is one of the LAST insects in this hemisphere that will ever go extinct), but how are you gonna prove it and enforce it? It’s not as if people take the caterpillars and put them in their bug collections. You need evidence to prosecute.