"The contractors said this is normal for the grout to "settle" and we just need to apply more grout, and may need to keep regrouting in the future."

ALL changes in plane must be 100% silicone (color matched of course) and never grout as the two walls move differently and grout will always crack in corners and changes in plane.

"i'm worried that if they just add grout the same way they did last time, that it will just keep happening, leaving us vulnerable to water damage"

Grout is not waterproof and was never intended to be waterproofing. The waterproofing system behind the tile is what is to shed the water that gets past the tile and grout.,

It’s normal for grout at changes of planes to crumble. Which is why it shouldn’t be used there. It’s required to be silicone. Grout, tile, and backerboard, are NOT waterproof. If there is no separate waterproofing under that tile, you have much bigger problems than crumbling grout.

Just dig out the grout and replace with silicone....(jeez)