Played on preview and Killing Flames still fails mostly when i keep the at will active, use Hadar's Grasp, put the curse back and after that KF fails, but not only then. On templock it failed only once but on fury loadout it activated 5 times in around 18 tries, no wonder peps are whining about SW not dealing damage!
https://twitch.tv/videos/318231621
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I use it in the 1st encounter slot if I am not playing crowd control with arms of Hadar, usually
I hope this gets a look at with class changes coming up
It has nothing to do with Grasp or the Curse. It's just because the game counts the dummy as dead when he has 0 hp and so, your powers don't deal damage. (Which explains why it happened to you more often on Fury)
Hopefully, it doesn't occur in real situations.
Test your rotation with Wooden pact Blade on the boss dummy in Port Nyanzaru. You'll see, there isn't any lost damage.