Well if it's a bug I've never seen anyone else have it. Does he lock up when he levels up? Or is it only when you level up?
Try having him Verify the integrity of his game cache. Open steam, go to games library, right click on Torchlight 2, go to properties, go to local files, and verify intergrity of game cache. Doubt it will fix anything, but if it's something stupid that can easily be fixed its worth a shot.
There could also be conflicts with the mods you guys are using, it would be a bit tedious to test, but turn a mod off, get into a game with eachother, and get a level, see if he locks up, if he does, then turn another off, then other, until by process of elimination you find which mod is causing it, turn that mod on by itself, and see if it still does it, can that mod or try to get help resolving the issue, if it works fine with just that mod on, start turning mods on one by one until it starts again, and you will find your issue, the easiest way to do this would be consoling levels or starting a new game. Like I said, tedious, and a pain in the butt, but its worth it if it works.
If none of the guys on here can help you, and changing your load order around / turning mods off doesn't work my guess is he has a memory leak of some sort, or has a hardware issue, but if he doesn't lock up when HE levels up, that pretty much throws the hardware theory out the window.