“Failed to load policies from XML. Not found (Error: 80041002; Source: WMI)” when upgrading ConfigMgr 2007 Client to 2012 SP1

I’ve enabled the Upgrade client automatically when new client updates are available option on my ConfigMgr 2012 Service Pack 1 (SP1) Site.

However, when I assign a ConfigMgr 2007 Client to this Site the Client upgrade fails and I look in PolicyEvaluator.log on the Client I see the following:

Applying policy Policy_ID
Raising event:
instance of CCM_PolicyAgent_PolicyRuleRevoked
{
ClientID = “GUID:”;
DateTime = “20130315175301.397000+000”;
PolicyID = “”;
PolicyNamespace = “\\\\CLIENT\\ROOT\\ccm\\Policy\\Machine\\RequestedConfig”;
PolicySource = “SMS:SiteCode”;
PolicyVersion = “10.00”;
ProcessID = 992;
RuleCondition = “”;
RuleID = “”;
ThreadID = 5760;
};Failed to load policies from XML.
Not found (Error: 80041002; Source: WMI)
Bad policy dumped to C:\Windows\SysWOW64\CCM\Temp\badpolicy-SMS_-10.00-Policy_Rule.txt

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