The action removed the county government from a lawsuit filed by Michael Tillman, who alleged detectives had tortured him to get a confession in a 1986 rape and murder case, the Chicago Tribune reported. The county did not admit liability.
The suit accuses Daley of conspiring to cover up torture as state's attorney when Tillman was convicted and later when Daley served as mayor.
Tillman had served more than 23 years behind bars when he was freed in January 2010 after a special prosecutor said his conviction relied on "coerced statements."
Tillman's suit said Assistant State's Attorney Timothy Frenzer was in a South Side police station during most of Tillman's interrogation and knew he was "being subjected to torture and abuse." Cook County's settlement removed Frenzer as a defendant from the suit.
Burge, who was convicted of perjury and obstruction of justice for lying in a civil lawsuit about whether he knew about or used torture to obtain confessions, is in federal prison.
The city of Chicago is paying for Daley's defense. The city has paid more than $30 million in legal fees and settlements in cases alleging torture under Burge in the 1970s and 1980s, the Tribune said.