I stand corrected. Vipper and Pip seem to be on to something here. What JohnSmith said could make sense, but god knows how they programmed it.
I tested on Over the Rhine since it has the largest elevations I can remember. Don't give much about the unit's health since I regularly moved the flamer to test some positions where damage is applied. Most of the positions I tried with both ground attack as well as auto fire.
First, THIS is working:
-> Flamer has unobstructed view of the (now dead) unit.
As soon as I move it behind the rock, everything bugs out. Funnily enough a ground attack triggers different animations than the auto attack. Visually, more flames got stuck in the rock.
Also not working with a full squad, so AoE damage is not applied either
To my shame I can't fully remember if this was working or not. I think it was, but super, super slowly:
However, for some reason this did not work:
Maybe some rocks of the cliffs created obstruction? Visually there was none, but well who knows what invisible objects there are.
Burning a squad below the cliff from next to the right bunker (see burning bush to the right edges) worked although slower than I would have expected. Burning a squad at similar elevation (see the burned ground at the concrete cover, flamer was near the trees) worked as intended.