Someone posted this thread topic a while back:

Fatal initialization failure - fix
I have this problem and notice in launcher was message about failed steam API so i try go into steam offline mode and start the game - it works :D then just switch into steam online mode and start game again and game work without any problem :) Sorry for english


I'm not sure if this next comment is related:

Steffire's suggestion on one thread:

Try reinstalling Steam-

-otherwise the next step would be to look into manually removing old drivers within the files.

yep, thanks for help.

i try reinstall steam and magically the game works ^^

Originally posted by cloudsefi:

yep, thanks for help.

i try reinstall steam and magically the game works ^^

I'm glad this worked. I really thought it wouldn't make a difference, but apparently Steffire was spot on!

I'm having this issue as well.
I tried admin launch steam and the exe Torchlight2.exe
then set Documents\My Games\Runic Games\Torchlight 2\local_settings.txt
WINDOWED_FULLSCREEN :0
FULLSCREEN :1
Now it was successfully launched
Then I restored those settings and it still boots, I don't know what the problem is.

Sometimes just deleting the local_settings.txt file works. That file gets corrupted easily and often causes problems that seem totally unrelated. It's safe to delete it because the game will make a new one when you start it up again. You'll have to reset your preferences, though.