Nagelring is not working correctly. When you use Nagelring on your hero and Fallen Lunatics explode damage calculation takes into account your +% of physical damage. But when you use Nagelring on your follower and Fallen Lunatics expolde damage calculation does not take into account your follower’s +% of physical damage. For example using Defender of the Westmarch on your follower calculates everything correctly (Wolf uses +% physical damage on your Follower). So this bug is only when using Nagelring on Follower.
If you notice, the fallen lunatics spawn in and follow you not your follower. So perhaps their damage is instead scaling with your %physical.
No. Nagel ring is on follower and lunatics belong to him and should use his physical %. This is bugged. Defender of Westmarch works ok on ffollower with % physical. This is a bug.