A method and fibre channel switch element is provided for isolating a defective device that is coupled to a fibre channel arbitrated loop. The method includes, isolating a port if a loop initialization primitive ("LIP") is detected from a device coupled to the arbitrated loop; configuring the device and acquiring an AL_PA; determining if the device is sending LIPs; and isolating the device if the device continues to send LIPs. The switch element includes, a port having an isolation state machine that allows the switch element to isolate a device whose behavior may result in disruption of other devices in the network. The state machine may also configure a device after detecting disruptive parameters from the device and perform diagnostic operations on the device.