Yikes, I use service@domain quite often. I didn't give thought to this possibility.
I'm quite sure the reason will be that this service emails others on "your behalf" and probably does something like placing your email address in the "From" field or in the body of correspondence. I assume they are concerned about phishing or catfishing emails purporting to be from the service.
This doesn't appear to be an adequate solution to the problem.
Something like $(hex(hmac(secret_key, service)))@domain could solve that. It would also mean service can't pretend to be another-service@domain when spamming you.
Though who knows, maybe hex addresses will look fake / malicious and trigger a ban anyway.
Related but nowhere near as severe, Samsung prevents you from creating an account with the email address samsung@domain. It showed a generic error message so I couldn't figure out why I couldn't create an account until I tried using a different email address.
Me thinks its a joke. But one has to wonder what why they block addresses with a specific name, did a lazy developer take a shortcut and use it to indicate admin rights? Testing/QA mode? Triggering extra logging?
Not OP, but the terms state this under sec. 5:
"BY USING THE SERVICES, YOU AGREE NOT TO: [...] use any of the Zillow Companies’ trademarks as part of your screen name or email address on the Services;"