But who do you cause damage to? It's easy if you're being invaded. Here's a couple imaginary examples where it's a bit different:
1) You're the intended victim of an early rush. Your expansion is severely curtailed, but you manage to win a big fight against your attacker. Your neighbors who in the meantime have been expanding like crazy, now take the opportunity to fight it out over your rusher's capitol, while you're left with 3 provinces, a feebleminded and crippled god, and no reason to take sides in the current fight.
2) You attack a neighbor in the mid-game, but it was a bad choice because he turns out to be a dominions kung-fu master and he totally decimates your forces. You then beg and plead with third party for help, and he turns out to be Chuck Norris, and wipes out the kung-fu master. But now you've only got your saviour Chuck Norris as a neighbor, and you're MA Agartha so it's not like you're going to be sneaking or teleporting anywhere. You're too puny for Chuck Norris to even consider wasting his time invading.
That's just a couple ideas off the top of my head. Burnsaber's crippled Oceania position in Faerun is another example.
Here's another aspect to consider too: as the losing side in a war, you sometimes know when you've been defeated. As far as you can see, your opponent has outperformed or outmaneuvered or just plain outwitted you, and there's nothing you know of that you can do to even touch him. It was a totally fair fight, you just lost. So, how far do you go? Do you pillage your homelands and raze your capitol's castle and lab, and poison the wells, etc? On the other hand, is it fair to hand the nation over to a replacement sub? Maybe the sub knows something you don't, and can even turn the war around. It could be that the "fairer" choice as far as winning is concerned would be to go AI. Personal note though: if I was the "winning" nation, I'd prefer to fight the sub and lose, rather than fight an AI and win. I need my strategy lessons pummeled into me!
