How I fixed it for me.
Hello I was having the same problem.
the problem wasn't the device being quarantined it was that everytime I entered a email@example.com when adding an account Samsung Galaxy would not let me enter the settings manually - it would set up the hotmail as an exchange account.
Finally I entered the account name with a typing error on purpose firstname.lastname@example.org I left out the i I put in the password and I was then able to setup the account manually. I had to change hotmal to hotmail in 3 places.
I set it up as IMAP with the following setting and it now works. Put your account name in place of "email@example.com"
Port: 993 (default)
Port: 587 (default)
As I say this worked for me.
I had the same problem with hotmail which lasted all day.* I got the error message that I needed to resubmit my password but after entering it I kept receiving the same error. Outlook.com settings showed that my devices were all OK. I deleted my hotmail account from my phone and then entered it again. Hotmail would still not work on my phone. I had no problem with hotmail on my PC.
For me this was the solution that worked.
1- Click on Play Store
2- Slide from left side of screen
3- Select My Apps and games
4- Choose to update all.
After the updates completed Hotmail worked just fine.
My guess is that auto update did not succeed in updating essential Google services that allow the e mail app to work properly. Manually updating solved the problem.
I hope this information will be useful to someone.
*I am using a Samsung J7 2016 and the e mail app that came with the phone.