In one of my previous support request (34387), Nicholas said this:
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Another side note.
Where is your subdomain root folder? If it's inside your main site's public_html your subdomain site won't work correctly. The .htaccess from the main site will be applied, causing problems accessing the subdomain. The subdomain root folder needs to be above public_html (possibly next to it, i.e. under your hosting account's root folder) to prevent any issues. You can select the subdomain root folder when creating the subdomain in your hosting control panel.
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I subsequently found a support article where Nicholas laid out - in detail -- why you should be installing your sub-domains in the root folder instead of in the public_html folder. Unfortunately, I can no longer find that post. Your help finding the post is appreciated, as I need some of the details for our hosting company.
Thank you.
David