I've been out of CAP for a few years, but the "CAP being dismissed" is a purely legal distinction. This was an "Air Force Assigned Mission" (presumably a checkride) which means the Federal Tort Claims Act kicks in. They were at that point not flying for CAP, the civilian organization, but instead they were flying for the US Air Force. If they had been flying as a proficiency flight, it would have been CAP as a civilian organization that would have been at legal risk. Each CAP flight has to have a flight release in advance; the Air Force assigned missions have to be approved at a different level (with the intention to limit the Air Force's liability to only the missions of direct import for a USAF purpose and for which they want to assume legal risk).