We are having the same problem but only with Bell webmail. Are you also using webmail and is it possible that your contact is also using it?
When composing an email and using "Insert image" the picture disappears after it uploads though an empty box is visible. If the email is sent the inline image appears when the message is viewed in a client like Gmail but if the same message is viewed in webmail it appears empty.
Had a chat with support and none of their suggestions resolved the issue. They did say that there was a recent update that might not have synchronized with my profile and they did something on the server that should have forced it. When that didn't work they suggested clearing all browser cache but I went further and did a fresh install of a different browser and still have the same problem.
The issue exists on all browsers I've tried: Chrome, Firefox and Edge and on all devices: android phone and tablet as well as on Windows 10 and 11 pcs.
Images in messages composed in the Gmail app seem to be fine and it seems to be only when Bell webmail has been used to compose the message.
