When you encounter a road event, it could cause your party to take damage. When you die in a scenario according to the rulebook you can retry it at full health, without doing another road event. Unless I miss understood, wouldn't it make more sense resetting the party health at the value after the road event? Feels like I can just exploit this rule and avoid the effects of the road event by dying intentionally in the encounter.
You understand the rules correctly. If you fail and retry the scenario, the Road Event effect no longer applies. Thematically, retrying the scenario isn't like loading your save in a video game. The failed attempt actually happened (which is why you only exhaust instead of die, and why you get to keep coins, treasure contents and experience). You could also view it as a balancing measure: if the scenario was too hard with the Road Event penalty, maybe it'll be just the right difficulty without one.
On the flip side: positive Road Event effects and Bless cards from donations also don't apply to retries.
And yes, you can game this system by dying intentionally, but then you could also repeatedly die intentionally to go through your entire stack of City Events in one go. With cooperative board games, the game kinda has to assume that you're willing to experience the game as intended, since no one can stop you from cheating if you would like to.