After trying many techniques, what finally ended up fixing it was by deleting the account in azure and creating a new one. Posting this here because we couldn't find this simple answer anywhere.
Some things to point out:
- It seems that Azure is picky about SendGrid having to be provisioned inside of Azure, and doesn't work well with SendGrid accounts that were provisioned inside of SendGrid.
- The previous account was originally provisioned inside of Azure, and was originally working, but that stopped working for some reason. The only thing we did differently was modify the subusers by adding a new "team member" which may have somehow invalidated the special azure user. Or it's possible there could have been some other issue outside our control.
- The previous account that stopped working was not showing up under All Resources in Azure, but was showing up in sendgrid accounts. The new account showed up in both.
I've also notice this issue happen when the sendgrid account monthly limit is exceeded. It's not for the use case described above, but important to note that it might also be the reason for this error message.