I experienced something similar, but relating to blizzard, not tiadrin. The second my units were affected by the spell, they started fleeing the battlefield until there was nobody left standing. I believe that merely being affected by magic may cause units to break morale - this affected only the ones standing in the spells radius. Unsure if this is the same issue, because this thread seems to be tiadrin based and mine was blizzard base - but the common theme is that the troops are killing themselves by running, not actually being killed by damage. This does need to be fixed IMO - 24 hours hospital time with no coprpses on the ground and most units were at 95%+ health when they fled.
On a semi-relevant note, is it me or is it kind of silly that troops that flee end up in the hospital? They're not injured, they abandoned the fight. The increased losses you take as a result of ranks breaking should be enough, why should breaking morale fill up the whole hospital?