To be fair, there were rumors that Larry DeTillio was supposed to have written a Crusade script (didn't happen since the series was aborted), so he was obviously still on good terms with the team.
However, he was not under contract following season 2. While unfortunately I cannot find the posting this is replying to in order to put it in context, here's what JMS said presumably about his departure:
1 Jun 1995 There's really not much *to* tell. Because I wrote 15 out of 22 this
season, and I held virtually all of the writers meetings, and personally
created and handed out the stories to freelancers, there wasn't a lot for
him to *do*; he spent a lot of time when he wasn't doing his scripts
more or less sitting on his hands. Larry's a world-builder, coming from
a gaming background, and this world was already built. There wasn't that
much for him to do, and his skills were being wasted. He'd never have a
chance to shine and come out from under the jms shadow to be recognized
for what he can do. (Very often, stuff in his scripts would get credited
to me, often incorrectly.) This situation would only get worse in later
seasons, with more and more arc stories, pre-determined, coming into the
foreground. So it was really for the best.