I’m guessing they put this in because they don’t want to be indirectly responsible for peoples lives and there are probably certification requirements for these kind of softwares that UE4 may not pass.
I doubt theres anything stopping you from creating a very realistic “game”. If this happen to be used to train military personnel and there’s some kind of complications as a result of this, then the EULA gets Epic off the hook.
You should contact us about a custom license if you want to create a simulator for use by the military. Our licensing guys would love to talk to you if that is the case