My big thing here is if there's no contract, where is the onus for having correct models? Yah, the models are worth money, but is it the artist or softwares responsible for those correct models? I'd say most people who understand how software works would say software, unless they were corporate shills. Make better software, or pay the artists, the reaction shouldn't be "artists are fooling me, they should pay"

Taking it to an extreme. Say somehow they had this same software back in the 90s, could the generative software sue because all the images were in 256 colors? From your perspective, yes, cause it was messing up their models that are built for many more colors