Mrs. Larusso did go to the cops to report on Kreese/Cobra Kai, but they wouldn't do anything. That's why she confronted Kreese herself and changed her mind supporting Daniel to restart Miyagido.

Obligatory: In fandom of course I'm on Team Miyagi, but I can mourn with everyone for Rob Garrison. It's on purpose irony the kid who says "Put him in a body bag" ends up in a body bag in the show, but the unfortunate coincidental timing of real life is sad and was not deserving. Separate the actor from the character. I remain a fan of Martin Kove since Cagney & Lacey.