So I was initially wrong about the way permadeath works in this game. The character that died I assume always dies that way no matter what you do. I'd been confused because since then I'd "lost" several characters in battle but rather than being dead they were just injured. I'd read so much about the permadeath that I wasn't sure what was going on. Then this happened to me...
Gunnulf was my best fighter. He could do the most damage, his special ability was a devastating AoE and he was my highest level character, which means I'd spent more renown (the games resource used for everything) on him than anyone else. Then he tried to save a cart from tumbling down a mountain with one of our enemies attached. I tried to knock the enemy off by throwing a rock - which bounced off the dredge's armour, hit Gunnulf, caused him to lose his grip and fall down the mountain, killing him whilst taking a large chunk of my supplies along for the ride.
Ahhh, there's the permadeath.