This situation can occur with cards from Ambuscade, Unity, & Silver Gulch, 1883 (and certainly with more decks in the future). The short answer is that targets remain in play during their own destruction. If there’s an effect that happens when a target is destroyed (whether itself, or some other card), and damage gets dealt, that target may still be a valid selection for damage dealing.

Explosives Wagon is a great example. When it is destroyed, it deals all targets damage. During its own destruction, it is still a target, so it must also damage itself. Furthermore, its damage increasing effect remains active during its destruction.

Why does this matter? Most of the time, it doesn’t. But as we’ve seen already, there are times when it can matter a great deal. For example, suppose Absolute Zero destroyed Explosives Wagon. He is happy to take the fire damage with Isothermic Transducer in play, and can deal cold damage back to the currently-being-destroyed Explosives Wagon. Now he’s done even more cold damage to power up his Thermal Shockwave!

Note that the above situations only really come up when a target is destroyed and there’s a “when this/that card is destroyed” effect in play. Once a target is going to be destroyed it cannot be “undestroyed” by gaining HP back above zero. When a hero character card would be destroyed, it is flipped instead and the other hero cards are immediately removed from play, so it cannot take advantage of any such effects. So be careful with that Thermal Shockwave.