Browse the support forums of carries and device makers and you'll find plenty of such testimonials. They would brick their devices and find themselves without warranty, which is not exactly an ideal situation.
It's not unheard of, but extremely rare to "brick" modern phones. Four years ago, when you had to replace the bootloader you could flash something that would "brick" a device to the point that only JTAG could fix it, but that hasn't been typical since the Nexus One. More commonly you can still access fastboot or ODIN and restore a system image which returns the device to a stock OS. This isn't ideal for non-tech savvy users, but it is a recoverable state.
Because it comes without any implied warranty as per the Apache 2.0 license[1] they use. Though when they go and put it on the Android Market, that creates a gray area that was not an issue when it was confined to the Android Modding Forums.
Users installing it outside the market though as it was always installed have no more right to Cyanogen giving them a new device than Debian or the Linux Foundation would if you destroy your PC installing Debian Linux.