It may be a security issue with the server. If the file is corrupt for some reason the server will reject it. However, before I jump to that conclusion try renaming the file to .jpg as opposed to .JPG (it should not make a difference, but I just want to rule it out).
I think it may be an error with the image. Open it up in Photoshop, then "save as" and rename it. It will be saved as a new file. Try and then upload this file.
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