The tooltip states:
On opponent or teammate being defeated, restore x[Recovery] health to this character and to all teammates.
Restores 15% bonus Health per Downtown Villian teammate.
This healing never procs on either a teammate death or an opponent death. I've tried in multiple modes (PVE campaign, tower of endurance, PVP battles) and it hasn't healed yet.
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It will proc and show the healing icon above villains head, however the healing doesn't actually heal for any amount.