Under certain conditions an entire army stack can be destroyed but usually the general will reappear somewhere in friendly territory. I sort of know what is going on, but not completely. Tell me if this is right and if there are other conditions.
1) No retreat. The enemy has military control (~95%?) of all adjacent regions so retreat is impossible. However it seems, and I could be wrong, that the army will try to retreat as normal instead of fighting to the death except during a naval invasion.
2) Ships when the port they are in is captured.
3) Lack of general supplies, harsh weather, and combat cause hits. Enough hits can destroy an entire stack, but usually this won't happen over a single turn.