Odd though, I'm very confused why this happened in the first place. The only case I know where the game would fail is if it isn't given write access to the path where it needs to store the settings, but Steam should make sure that cannot happen.
I recently helped someone with a save problem in GRID2 by telling them to set write permissions.
The only reason this can happen if you're on a limited account and administrative privleges are required to install the game, which can happen if steam is installed into the program files directory.
Then there's the possibility that somehow the directory got a write lock and windows can't understand that the lock is already done. This can happen if the computer crashed during the write process.
Also, the way steam cloud works, if a save file gets corrupted at some point (which is unlikely to happen, but it can happen), then it is damaged until the game and all associated files are deleted because with a Verify Game cache action, only the files in the steamapps folders are checked, not the actual savegame. They are synchronised back and forth after each game, but if the file is damaged, and the game itself does not fix it, but instead ignores it, then that file remains unchanged, and thus unaffected.
So if the game can't read the settingsfile, it should generate a new one by itself and rename the damaged one.
A manual action in this case would be to remove the file yourself so the game can recreate one.