When a great NPC hero dies, everyone who participated is flagged and a certain memento loot (such as William Wallace's sword or Saladin's turban). The NPC also drops a full set of gear (one piece for every armor slot) and often a few others (extra rings, trinkets, things that they carried). Loot is distributed via a system like WAR public quests (contribution+dice roll).
When a normal NPC dies, their corpse is lootable by the person or group that did the most damage. NPCs drop all the gear they were wearing. Usable gear will have lit icons, ruined gear will be faded, lootable but usable only for the scrap material.
When a player dies, whatever they are holding and whatever is on their head drops ( sometimes excluding Artifacts). People in their party can pick up their fallen items. These items follow the same loot rules as NPC drops.
Any loot not taken from an NPC corpse after 5 minutes can then be looted by anyone. For player drops, this time increases to 10 minutes.