In my opinion, the greatest danger a team runs from measuring code coverage is that it rewards large tests, and penalizes small ones. If you have the choice between writing a single test that covers a large portion of your application's functionality, and writing ten small tests which test a single method, only measuring code coverage implies that you should write the large test.
However, writing the set of 10 small tests will give you much less brittle tests, and will test your application much more thoroughly than the one large test will. Thus, by measuring code coverage, particularly in an organization with still evolving testing habits, you can often set up the wrong incentives.
