grub fails to install when installing from bootable USB

[betesh]

1) The release of Ubuntu you are using, via 'lsb_release -rd' or System -> About Ubuntu
16.04.1

3) What you expected to happen
Ubuntu should be installed without errors

4) What happened instead
The installer failed with the message: "The grub package failed to install into /target/" or something close to that.

ProblemType: Bug
DistroRelease: Ubuntu 16.04
Package: ubiquity 2.21.63 [modified: lib/partman/automatically_partition/question]
ProcVersionSignature: Ubuntu 4.4.0-21.37-generic 4.4.6
Uname: Linux 4.4.0-21-generic x86_64
ApportVersion: 2.20.1-0ubuntu2
Architecture: amd64
CasperVersion: 1.376
Date: Tue Dec 6 08:23:28 2016
InstallCmdLine: BOOT_IMAGE=/casper/vmlinuz.efi file=/cdrom/preseed/ubuntu.seed boot=casper only-ubiquity quiet splash ---
LiveMediaBuild: Ubuntu 16.04 LTS "Xenial Xerus" - Release amd64 (20160420.1)
ProcEnviron:
 PATH=(custom, no user)
 XDG_RUNTIME_DIR=<set>
 LANG=en_US.UTF-8
SourcePackage: grub-installer
UpgradeStatus: No upgrade log present (probably fresh install)