It obeys all common rules for ability damage.
If an unit is killed in the process of using chain zap, all chain zap attacks will still be performed. For example, if two Spellbinder Batu are targeted, they will both receive damage regardless of remaining health of caster. The total of 4 reflect damage is dealt together afterwards.
It is interesting to notice the chain zap can target all species of Matimilopeotryx at the same time.