This is correct. Depending on the stakes, the right answer would be to err on the side of caution. Certainly repeated incompetence in a private setting would be grounds for suspension or termination.

At what point does incompetence /become/ malice?

There is certainly a level of incompetence that requires active ignorance to one's naivety. I'd certainly consider a stubborn person who arrogantly ignores concerns of experts malicious. The active nature certainly matters.

Yes and: fraud and errors are often indistinguishable.

People with malice like Elon Musk have noticed the widespread use of this aphorism and repeatedly leverage it to their advantage.