The rules reference disagrees with you.
Yes, they are.Except the character is *never defeated*
Page 17, replacement effects, 2nd chance is LITERALLY the example they use.
It is the example they use, but it's not saying what you think it's saying. Pay close attention to the wording: "the character is never considered to have been defeated." It doesn't actually say they were never defeated. Because, YET AGAIN, being defeated is the trigger for Second Chance. The character must, at some point, be defeated in order for Second Chance to do anything. What that line actually means is that other effects which might trigger from a character being defeated, such as Grievous stealing one of your upgrades, don't have the opportunity to trigger because the replacement effect takes precedence.
This is actually made clear in the actual rule above the example, which says the original effect is considered to have not resolved . Again, pay close attention to the wording: It says it doesn't resolve, not that it never happens. The rule about excess damage applies as part of the conditions for "defeat" being met, but the results of being defeated never resolve .
This is not an open question, it is not an unknown, there is no debate. As I mentioned previously, this question has been answered by the designer himself. My goal here was to try and correct the misunderstanding around how this works, but it's getting old fast. Here's the link, you'll probably have to join the group to see it, so I've copied it for anyone willing to trust that I'm not making it up.
Lukas Litzsinger You ignore excess damage, and then heal instead of being defeated. So you'all always end up at 5 less damage than your health.
Thread:
https://www.facebook.com/groups/swdestiny/permalink/1855379868017954/?match=bHVrYXM%3D
Lukas's response:
Edited by Buhallin