This error may occur if your CRM instance is hosted by Blackbaud and using Custom authentication (your organization's own active directory).
We're currently evaluating this issue for a fix in a future release.
To address this issue for the application user in question until a fix may be available:
1. Go to the Application users page (Administration, Security, Application users).
2. In the data list locate the application user and choose the Edit email address task.
3. Enter the email address for this user and Save.