Judy's motive for turning Steve in seemed in part to be a way to keep him from turning her in for Ted's hit-and-run death. Steve had previously told her that since he was the only witness, he controlled the narrative. Maybe she hoped that the police could lock him up or that it would at least discredit him if he ever decided to try to implicate her in Ted's death. But part of the reason she turned him in also seemed to be because she was hurt that he was seeing someone else and that he rejected her when she thought she was pregnant. (She turned out not to be.) Furthermore, before turning him in, Judy emptied his bank account to give to Ted's wife Jen (Christina Applegate) in an attempt to assuage her own guilt.