@Baron:
In response to the OP, it does negate the surprise strike if the defender takes the hit on a sub. That sub still gets to fire back, unless the attacker has a destroyer when the surprise strike on defence is negated.
Submarines casualty can retaliate against Submarines first strike only if the other side have no Destroyer. Otherwise, its surprise strike is blocked so it fires during regular combat phase and if chosen as casualty it is sunk and denied an attack or defense roll.
So, when no DD is present, Submarines are almost as useful as Destroyers because chosing one Sub as casualty gives no first strike advantage to the other side, since the casualty still roll his defense.
That is what I said.