In your case did Will have a pet out at the time? I'm assuming the guard got involved because the pet (or whoever) jumped close enough to him that he took damage.
Nope, no pet out
I've seen this in other areas from time to time. One of your characters will start delivering AoE damage (crates will shatter for example). Someone theorized they're in a constantly falling state. Reloading seemed to fix it for me.
That makes sense... it started happening right after they all seemed to climb down a ladder but maybe it got fuddled and they all got stuck in a "falling" loop without an animation. Would explain why everyone was getting mad at Wyll when he stood close to them as well if he was causing invisible splash damage from his "falls".