The way I rule this one is by telling my players everytime they are in a battle were they are made unconsious for in a battle with something large (dragon, giant, etc...) then they need to spend GP equal to half the price of the armor or take a reduction of half on the AC it provides because of all the broken/torn parts of the armor.
There are exceptions, I judge this on a case by case basis. If they are fighting a skilled assassin then the assassin will probably go for weak points in the armor and not the slash and crush mentality of a giant. So, basically, if they are in a situation where a lot of damage would be applied to the person (and therefore the armor), it needs to be fixed.