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More likely this is the judge signalling to the city they better get a deal on the table the family can/will accept or it might happen and set a precedent.
There's no need for any new case law here. It's already established that the cops can't go into a fenced off yard unless they have a warrant or accident circumstances, which they didn't. No precedents are going to be set, because they already were, long ago.
I believe that the victim filed a civil rights lawsuit with multiple claims, and this one claim was so obvious that the judge ruled there's no need for a jury to rule on it, but that the other claims would have to go before a jury.
This means the city is going to lose on at least one aspect of the case, and they could choose to fight the other aspects of it in court, or they could settle, as you suggested.