If you recall, the hydrolysis of Grignard reagents yields alkanes. This is just one example of the strongly basic behaviour of Grignard reagents. If a compound has both halogen and OH present then while Mg insertion would take place between the C-halogen bond, this region would be highly basic due to electropositive Mg. Even though alcohol character is not considerably acidic, such a strong basic character of Grignard reagent would force it to protonate. There are many compounds that "do not play well" in reactions involving Grignard reagents, some of which are water, alcohol and carboxylic acids.