I think it has to do with pathfinding and target selection ...

the AI selects a target at he beginning of the battle and (if melee capable) tries to get to it.

However when the path to this target gets blocked over the course of the battle, the AI oftemn seems to get into a n undefined state, where it seems to wait for the way to its primary target tpo get free again ... and, for some reason, refuses ti switch to targets for which it hasd a valid pathfinding solution.

It seems to be still in there ... it occured in my current game that was started after applying 1.02 ...

I had a fight against this Titan who rules over the winter landscape. At one point during the battle (after I had already lost several units) the Titan targeted my soverein (who had a bow at this time) ... he managed to get near to her (female soverein) and launch a single attack (which she survived thanks to her armor) ...

after this attack my soverein managed to disengage and cover some distance with her horse. I surrounded the Titan with my 2 melee heroes while my soverein and the only remaining archer unit began shootzing arrows at the titan.

It seems like at this time the bug struck, because from then on the titan would do nothing, not even try to attack the 2 melee heroes that had surrounded him (well, side of the battlefield ... below end to the right my heroes, the left covered by landscape (which also means that theoretically he could have taken the upwards direction which was free for him to move [although this would have taken him further away from his target, my soverein, who was downwards on the map])

My game was also started with 1.02. 

It amazing how often this happens. 

In Mount and Blade, it was the same thing.  When the AI enemies get into a nice formation and advance together, or decide to shoot it out, or order a cavarly advance and charge, there are ways to form your troops and crush them with practically no losses. 

But when they have no commanders left, and just come at you in an amorphous blob of horses, infantry and archers, with random units charging, flanking, or running circles and shooting, prepare to lose half your troops, if you are lucky.

Of course, when it's players, it's a whole other story. Nothing I like to see better than players coming at our line in a blob. Mostly because with players, losing four fifths of your men is still a resounding win.