The sensor can fail in two ways. Since it's a resistance temeprature detector (RTD) type it will either fail high or fail low depending on the failure mechanism (short or open circuit). As a thumb rule always believe your indication, however when suspect, verify by other means. If your temp guage says the engine is over heating but seems normal, the physical check is what I outlined earlier, look for coolant puking out the overflow. If it's not puking then the detector is suspect and the only damage possible is to the radiator fan, not the motor. If the error is intermittent then it's an electrical issue, a connection is loose, corroded, or shorting to ground.