If you are carrying the King's Gift and have your pack yanked, you enter a state where you are stuck with the flagpole effect and a permanent slow effect. Relogging or resting doesn't remove it. The only fix seems to be a server reset or a DM giving you a new King's Gift that you can then drop.
I think the desired state would be that when you are subdued or knocked out while carrying the King's Gift, then it would be safely removed from your inventory and placed at your feet. This would eliminate the need for someone to yank your pack,which is a real discouragement from participating in the dispensary fights in the first place.