If you have played the Skarbrand campaign you might have encountered this. You fight a battle with your bloodhost army, your general unit (exalted bloodletters) takes a few casualties and after the battle the whole blood host army dissapears.
The reason: If your general unit dies, your blood host army dies. The general is a random entity in the general unit, which cant be differentiated from the regular ones. The same is true for all settlement garrisons. Whether you get a leadership penalty on top of his death I have not found out yet.
Suggestion: Have a different model for the general with slightly better stats and more hit points, like in older Total Wars. He should also stand at the and and on the side of the unit, so he dies last, not first if the enemy is lucky. Also there should be a message in the battle that your lord died.