Outlaw "Dirty Rotten"

[ArcadianRefugee]

Dirty Rotten So-And-So: When Bad Stuff happens to a non-Outlaw, go up a level.

Does this mean only when Bad Stuff has an actual effect on the player (ie., "Lose you headgear", "Damn, there goes my Horny Helmet") or whenever Bad Stuff occurs, regardless of whether or not it has an actual effect (ie., "Lose you headgear", "...well, I'm not wearing any!")?

I'm thinking the former, to coincide with Schadenfreudian Slip (I believe that's what the 'Slip says) but just checking.