The Merchant outside the trading company in Ondras Gift was killed during my playthrough by Animat lightning attacks. They fired at me and the magic attack keeps going. I knew something was amiss when a guard and a NPC were running around down in the water during my fight with the Animats.

 

Is this a bug? I never had an issue with stray magic and arrows or whatever before. before

 

Thanks

It's not a bug.  Your party can also kill bystanders with area effects.  It's just very uncommon, I think, because there's relatively few enemies that you engage "in public" that use area-effect attacks, and most players tend to be careful about it.