I'm not sure that there's any 'bad luck protection' for level up capsules, other than you're guaranteed a 6300 champ in the milestone capsules.
The value of the level of chests is more or less fixed within a handful of values (you may get cheap champs, but you'd get multiple), so depending on the player, what is 'good' or 'bad' luck might vary. Some people may want unowned champ shards, but others may prefer to get owned champs since they can DE them with no apprehensions, or maybe they want the shard for the sake of leveling up mastery. Others might actually own all the expensive champs, but want to keep getting those 6300 champ shard drops (since they imply getting the max possible value from a level up regular level up capsule) rather than inadvertently biasing their odds towards cheaper stuff they don't own.
Bad luck protection is a thing for regular chests (guaranteeing a skin shard or gemstone within X chests), and for honour capsules (you're guaranteed at least one honour capsule with Y period). Pretty sure owned champs has no impact on what you get from level up chests though.