If the naval unit has “two lives” I would make the suggestion to amend it as thus:
1) Any non-Battleship units damaged may no longer attack or defend. (Attack Value = 0, Defend Value = 0. It may absorb hits and die, but cannot return fire no matter what. Crews are busy keeping the ship afloat, no one is available to fire the guns.)
2) Battleships may return fire at a 2 or less, they may not attack. (Attack Value = 0, Defen Value = 2)
3) Damaged warships only move 1 space. (They cannot move at top speed, due to their battle damage.)
4) Ships are repair for free.
4a) The damaged ship must end its turn adjacent to one of their nations own Industrial Complexes (Naval Bases for E40, P40 and G40)
4b) Damaged ships are considered to be repair between Purchase New Units and Combat Moves phases (so they are back to full strength before moving them into combat.)