I suspect it depends on the field, but in my experience it’s often a good indicator of success. A shoddy letter betrays a lack of professionalism. If you’re not going to spend 10 minutes running a spell checker it means that either it’s not important to you, so good bye, or that your standards are really low and you will keep producing garbage if I hire you, so good bye as well.

The problem with cover letters is false positive (people who did not write the letter themselves, or who did it to a much higher standard than their usual). But then, that’s what interviews are for.

I did hire a couple of people with either a subpar CV (some good people sometimes end up in dead ends or difficult situations), or cover letter (not everyone is a great writer), or reference (your issues with your former boss are not always your fault), or interview (you can have a bad day), so I would not rely on a single factor. But a combination of 2 dodgy elements is an automatic rejection. Each one tends to surface different aspects.