How are you going to be immersed while staring at a game over screen? I'm very confused here.
And what's your next step? Close the game and never play it again?
In the real world you have to live with the consequences (or die with them). You can't just load a save game.
I understand that there are certain situations you think should result in death or inescapable jail, but consequences should not be game breaking, especially in co-op.