Check the server logs and see the following error logged:
18:28:18.165 [main] ERROR o.t.e.network.internal.NetClient - Error processing event
java.lang.NullPointerException: Cannot invoke "org.terasology.engine.rendering.nui.NUIManager.getHUD()" because "this.nuiManager" is null
at org.terasology.module.inventory.systems.CharacterInventorySystem.resetDropMark(CharacterInventorySystem.java:212)
at org.terasology.module.inventory.systems.CharacterInventorySystem.onPlayerDeath(CharacterInventorySystem.java:241)
Proposed Fix
A headless server shouldn't try to run the respective code path in the first place as it is not expected to have a UI.
If the respective code is relevant for players, this should be run client-side.
What happened
I died in-game and the server logged an error.
How to reproduce
Proposed Fix
A headless server shouldn't try to run the respective code path in the first place as it is not expected to have a UI. If the respective code is relevant for players, this should be run client-side.