From what I've noticed, and I've never played him myself, but it's the same reason everyone thinks you're a human if you don't use his mask. Fane, well, just looks human.
Except that the AI always targets him 100% of the time with healing spells because it knows he's Undead...
That's a mechanical issue. Lore and game mechanics are two very separate things. Here, I'll explain it:
Lorewise: Fane looks human shaped and sounds human.
Gameplay: NPC Loremaster skill is universally too high.
