One could solve the conflict by changing the perspective:
See the task "use this image" as implying "take care of the license"
The client proposes to use an image, and it looks like he has not acquired the permission to use it. Ok, no problem, using an image involves handling the license, he did not yet do that, to it's part of your task:
- confirm with the client permission has not been acquired, if unsure
- this may be the right moment to give a hint that a payment may be needed, but you do not need a clear answer at this point
- find out how to get the license, and prepare payment procedures
- ask the client whether he accepts the price (which implies the question of whether he anticipates making payment at all)
- this is the final point where the client has to understand the issue, and possibly start a discussion for other alternatives
- ask the client to pay, or confirm he will pay for it
- use the image
It helps to be - or pretend to be - absolutely convinced handling the license is part of the overall task, very obviously. Ideally, you show the mind set that it is clearly a question of who handles the license, and not at all a question of whether it will be handled.
Even if the client finally insists that you use an image without a license, you should be in a good position for that discussion. He would need to explain why you should "not do your work correctly", and it is implied and obvious that he is requesting something that is wrong in some way.
In this conversation, you could, instead of accepting his insistence, clearly demand that he should provide the image himself - it's not the kind of work you offer to do for a client. Even if that is used only as a rhetorical element before finally accepting, it should get the message across even more clearly.
