This can lead to serious problems any any field where a observer studies a subject, notably fields such as psychology and sociology. A study was done connecting this to the reason why people generally are bad at detecting lies. The study suggests determined that there is a positive correlation between, the fundamental attribution error and lie detection. That people who are better at detecting lies are also better at separating a subjects internal and external traits (2).
The Correspondence Bias goes further in describing why human behavior causes us to make these assumptions. The reasons range from,
Lack of awareness - of the subjects life, and factors that contribute to an action
Unrealistic expectations - Expecting a parent to know everything
Inflated categorization - categorizing similar people, and giving a higher general standard.
Incomplete corrections - (someone needs to explain this one to me)
These differ from the reasons for the fundamental attribution error, but at their core, they both attempt to solve this primal mistake.