When you make the event that start the battle,when you select enemy encounter on that event,check the box that says custom defeat handler.If that box is selected you can edit the defeat to what you want instead of it being game over.So say you select that and then you'll se a fork condition:
Victory handler
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Defeat handler
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In defeat handler select change hero grafic,and change it to a grafic where the hero is knocked down,and do whatever else you like!