Just got back to the game after a while, so I was mucking around with a bunch of Normal AI opponents. I'm running Entrenchment v1.3, and after beating them around a bit (wasn't even a lot, just a couple of assaults on my planets that failed) I'd get the message "X has been defeated." They still had all their worlds, though they did lose their flagships. Is this a bug? Does it happen on higher than Normal difficulty?
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