When creating or updating a user and granting access to dav the entrey in the dav passwd file do not have a password assigned. The following is an excert from my dav.digest.passwd file. The three entries with encription have passwords created by htdigest2 and work the other two were created with virtualmin when adding a user or editing a user.
This is from my test server that is why strange FQDN. Names are changed to protect the innocent.