This was written to me in a letter a few years ago from what I discovered to be a scam agency (it came from one of the many names under the Writers Literary Agency). The statement wasn't meant personally; it was part of a form letter meant to convey that they'd experienced some pretty crazy things from writers. (I guess having well minded writers inquire about questionable business practices labels them as psychotic.)
I think sometimes we are paranoid, for sure. I mean, a lot of us have spent oodles and oodles (I really like typing the word "oodles") of time writing, prepping, submitting, wishing, and hoping that someday someone will say the three letter word we all want to hear, "YES", that when it finally does happen, we have good reason to be suspicious. So many people try to scam us that it is in our best interest to have a healthy aura of paranoia every now and again.
In general, fiction writers are also terribly emotional creatures. (And yes, I'm aware that I just called myself a "creature".) When we write, we have to prepare in much the same way an actor prepares to play a part. We have to get inside our character's heads, we have to think what they are thinking, see the world how they see the world... basically, we have to change our entire perception. That often means that we have to feel the emotions that our characters feel and be sympathetic even to the antagonists we create, no matter how bad they are.
Psychotic, no. Well, not most of us, at least. And if you find an agency or publisher calling you psychotic just for trying to cover your own back, a big red flag needs to go up and you should investigate them further.