[DiogenesLamp]

Neither we — the insurer — nor the law enforcement agency (be it municipal or state) would defend a current or retired cop

That may be so, but does not prove the retired cop is not acting under the color of law. These actions, or lack thereof, could also be construed as your company being risk and loss averse, which is something we already know about insurance companies.

If it isn't covered in the policy, why would any insurance company pay for it? Who gives away free money?

[ought-six]

With all due respect, you have no idea what you’re talking about.