I looked into this and the Dark Shard Sword legendary upgrade says "Whenever Necrosis is applied to a target, instead of an affliction deal 100 Necrotic damage in an area around them".
So it completely removes the ability to stack Necrosis at all, in exchange for a pathetic single instance of 100 damage every time you would have applied a Necrosis stack. Unfortunately it's not a bug, just a very poorly designed "upgrade".
The Legendary upgrade is actually a nerf, with it equipped it hobbled my necrosis healing build. And there's no way of undoing this upgrade either.