There seem to be two problem areas in this file -- I am wondering how you created it, given that it seems that there are points very close to each other.
The first error the mesher encounters initially looks like there isn't anything wrong.
But if you zoom in several times to that area, you will see weird "double points" including the point that the mesher identified with a red circle.
Using the false die mold method, I deleted the gray polygon and recreated it, and that particular mesh error went away
Here is a link to what the false die mold method is
You basically surround the polygon you want to delete and recreate with other polygons, so that when you delete it, you can then just use the Paint tool to automatically fill it, and then delete the extraneous surrounding polygons. In general it is better to let the program match points, using the fill tool, rather than trying to do it yourself.
I then generated BCs again, tried to run the simulation, and got another mesh error. Again, on zooming in to the point, there are a few points really close together
Again, I deleted the gray polygon, and refilled the resulting void (this time it was completely surrounded by other polygons) with the Paint tool.
That seemed to solve the problem because after generating the BCs again and running the simulation, the file meshed without issue.
I have attached the fixed file. I used THERM 7.7.10
Robin