I have the starter set damage counters and one or two additional sets. And one set of damage counter bags A-E where they all come in.

Why use only one set of bags for several counter sets?
For practical reasons. I do not want to buy a second (or third) set of bags, and I think in a large game with, let's say, 12 ships it will almost be impossible to separate the counters into the correct bags after the game. Sooner or later something will get mixed up anyway.

The coastal batteries require a different set of action tokens (the "fire" and "reload" tokens have a different symbology and you don't need ship specific actions like lower sails or raise sails) but I don't think they include additional damage counters.


In one situation we put the counters back (always in the correct bags, of course) during an active game:
When a ship sinks, burns or strikes it's colours, so that is no longer an active part of the game. Then the ship's log is cleared immediately and the counters go back in the bags so the can be drawn a second time in the same game.
Actually, we just follow the standard rules here (page 18, "surrendering of a ship").