This has been happening when my wife and I play. We have yet to figure out what mod or how it triggers but occasionally we cannot hit anything directly, or be hit. However, we did figure out we can 'fix' this when it happens without needing to restart the game by simply using an AOE weapon such as a hammer, to kill something - anything. Another thing that is similar is being unable to open a door, the option is just not presented when looking at it. It works when looking at the door frame, just not the door. We found that we can 'fix' this bug by just using a portal.