There is a potential security issue here.

Whenever a legitimate program is seen asking for a password as the
result of an automatic operation people come to think of it as normal.
This undermines the suspicion that we would otherwise encourage in
people to help them avoid scams and malicious software.

A more serious security issue arises if you are using a normal user
account and the connection in question is shared. In this case you get a
second dialogue box asking for an administrator password for privilege
escalation. In this case we have users socially engineered to provide
privilege escalation to any user-space program that impersonates this
bug.

I think it would be preferable that it didn't ask for a password (even
if we know that's what's wrong) and just retried from time-to-time. If
the user wants to remedy the situation they can just go through what
they did first time they connected, at least then they expect to be
asked for a password so no harm is done.

Observations based on 16.04.

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Touch seeded packages, which is subscribed to network-manager in Ubuntu.
https://bugs.launchpad.net/bugs/615239

Title:
  Every Wi-Fi disconnection is treated as an authentication error

Status in Canonical System Image:
  Confirmed
Status in NetworkManager:
  Confirmed
Status in network-manager package in Ubuntu:
  Confirmed

Bug description:
  Binary package hint: network-manager

  I'm using lucid, with the 0.8-0ubuntu3, in a laptop, and is incredible that 
the nm-applet couldn't diagnostic why the wireless connection was lost and only 
trow the password prompt when I've lost the signal. nm-applet should see the 
kern.log or dmesg to react at signal lost. For example, when the kernel try 3 
times probe the AP and don't get response nm-applet say The pc are far away 
from the access point and can not be connected. Please, move close to the 
access point or try another more near. And by the way, when the authentication 
fails, or the association.
  --- 
  Architecture: i386
  CRDA: Error: [Errno 2] No existe el archivo o directorio
  CheckboxSubmission: ee8ebec101005ce57a9c3355b36ca8a7
  CheckboxSystem: edda5d4f616ca792bf437989cb597002
  DistroRelease: Ubuntu 10.04
  IfupdownConfig:
   auto lo
   iface lo inet loopback
  InstallationMedia: Ubuntu 10.04 LTS "Lucid Lynx" - Release i386 (20100429)
  IpRoute:
   172.16.254.0/24 dev wlan1  proto kernel  scope link  src 172.16.254.5  
metric 2 
   169.254.0.0/16 dev wlan1  scope link  metric 1000 
   default via 172.16.254.200 dev wlan1  proto static
  Keyfiles: Error: [Errno 2] No existe el archivo o directorio
  Package: network-manager 0.8-0ubuntu3
  PackageArchitecture: i386
  ProcEnviron:
   PATH=(custom, no user)
   LANG=es_DO.UTF-8
   SHELL=/bin/bash
  ProcVersionSignature: Ubuntu 2.6.32-24.39-generic 2.6.32.15+drm33.5
  RfKill:
   0: phy0: Wireless LAN
        Soft blocked: no
        Hard blocked: no
  Tags: lucid
  Uname: Linux 2.6.32-24-generic i686
  UserGroups:

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