Ilav can be found on the road between the Refugee's camp and the city. When spoken to, he will ask why the gods have left them. He will continue to believe that the enemy has won and that they are doomed even after the city is retaken.
Covenant: "The Imperial line is dead, and the gods have forsaken us. Where is our blessing? Where is our protection? Where are our gods? The Enemy triumphs, and we die alone."
Enemy: "Lord Dagon is the Enemy. He is the Prince of Destruction, and the Daedra are his servants. The Chapel is cast down, and the faithful...my friends...all dead. The Enemy has won, and we are destroyed."