The problem is that the system is in Secure Input Mode.
Secure Input Mode is a system security feature that stops the ability to monitor keystrokes while you are typing in a password field. Unfortunately, it sometimes gets stuck on such that the system thinks you are still in a password field even though you aren’t.
Keyboard Maestro reports that the system is in Secure Input Mode when it detects this case. It is not something Keyboard Maestro can “work around” - it is a system security feature that stops Keyboard Maestro or any app from monitoring the keystrokes, and would not be much of a seucrity feature if it could be worked around, so Keyboard Maestro cannot do anything about this except report the issue to you.
Its very clever that TextExpander figures out which application is the culprit. I have no idea how they do that, I will have a chat with them.
There is a bit more about the issue on the wiki.
I suspect a case where it happens frequently is at login time where an application asks for a password while the system is still overwhelmed with launching applications, and thus notices the password request and turns on Secure Input mode but does not notice the application replaced at the front with another application and turn Secure Input mode off.