It's literally the same effect. The exact security isn't specified so you're going to get the "worst" one that is eligible. If you misjudge how bad the "worst" security is then you'll get screwed.
Similarly, these CDS don't specify the exact security so you need to think about the worst case. The major difference is that the auction only happens if there is a credit event.
Maybe here's an easy non-financial way to think about it. Suppose we sign a contract that says that I need to delivery 1 ton of at least 90% gold to you. When you price the contract, you probably shouldn't assume that I'll deliver 99% gold.
