They exists and you've experienced brushes with them. At least, in a philosophical sense. Do you know of anyone, including yourself, who has problems with drugs (including alcohol) or Alzheimer's or perhaps schizophrenia?
Some folks have such a twisted, distorted, extruded sense of our reality, that they must be outside of it. If reality is what is perceived, and they perceive some thing different, more than mere denial can account for, that they truly believe a completely different set of facts, they are living in an alternate reality.
I am coming to accept this as a viable explanation so that I can accept them in spite of their behavior. Not that I agree with or condone any specific behavior or misbehavior. It allows me to love the person and detach from the consequences of their behavior.