Does "lose 1 Sanity" count as "taking mental damage"?
"Lose one sanity" instructs you to reduce one specific stat, which is quite different from taking one point of mental damage, and so are the situations were both occur. While taking damage results in stat loss, I don't think stat loss is damage. The existence of a difference between the two is supported by the game using both "lose 1 from a mental trait" and "take 1 point of mental damage" in different circumstances.