When an Investigator is Defeated the player chooses a new investigator at the end of the Mythos Phase.
If the Otherworldly Dreams Prelude is in play
After resolving setup, if Hypnos is the Ancient One, each Investigator loses 1 Health and 1 Sanity and gains 1 Focus. Then, each investigator may spend 1 Health and 1 Sanity to gain 1 Clue.
Is the new investigator affected by this?
What about Preludes that say "Before step", like Call of Cthulhu
Before step 9 of setup ("Resolve Starting Effects), each investigator moves to the nearest Sea space and loses 1 Sanity. If Cthulhu is the Ancient One, each investigator places 1 Eldritch token on the nearest Sea space that does not contain an Eldritch Token
If Cthulhu is not the Ancient One, set aside 1 Deep One Monster and spawn the Cthylla Epic Monster on space 3.
Then, each investigator may spend 1 Sanity to gain 1 Clue.
What about Epidemic, how much of that would be resolved?
After resolving setup, if Abhoth is the Ancient One, each Investigator spawns 1 Cultist Monster on a Wilderness space that does not contain a Cultist Monster.
If Abhoth is not the Ancient One, the Lead Investigator spawn the Child of Abhoth Epic Monster on the nearest Wilderness space.
Then, each Investigator gains 1 Illness Condition and 1 Clue.