Sophie does something like this! She crouches down on her tummy, like she's afraid of me. Yes, it is heartbreaking!
But I'm in the same boat as all of you-- I've never spanked her or swatted her, or anything like that. I read on here that someone cues the dog when she's going to pick it up. Now I say, "up, up" before I pick up Sophie. I'm hoping maybe it might help. I actually feel embarrassed when she cowers down like that in front of people... I know they're wondering what on earth I do to the poor little thing!