At some point, Lorenz decided to kill himself. The law in the Shivering Isles forces the spirits of the undead to be trapped on the hill until they are reunited with their remains.
Lorenz's remains can be found in Knotty Bramble.
It is a crime in the Shivering Isles to commit suicide, the punishment for that poor soul is entirety trap on the Hill of Suicides. The only way to break the curse is if somebody is to return the skull to its spirit.