Don't get sue happy just yet. Here is how it works...I am not expecting 100% privacy on the iPhone or any phone for that matter when using it for more than a dumb phone. I believe I need to exercise the options I can to try and keep myself more secure. If we find out that turning off the toggle for iCloud photos doesn't stop scanning on the device when Apple said it does, then that will be time to take legal action.

Apple’s New Child Safety Rules: Here's What to Know
Apple announced changes to how it handles certain images in its iCloud Photo Library and certain images sent on the Messages app
Scans are done on the device prior to being uploaded to iCloud. This is the only way the can keep end to end encryption. So if iCloud Photos if off this step never occurs. Google only has their photos truly encrypted during transport. This makes it easier for them to scan and modify (space saving Google Photos option).
It uses hash data which is one of the methods Google uses. Hash data isn't the most effective method but its the most private because you can't reconstruct the original image with only the hash data (its used for TouchID). Apple needs a "collection" of these images then they will be able to alert the authorities.
I hate to break it too you though but you're images have been scan for a very long time. Open up Photos and type in "car" or "dog" or something. Thats on device too. Same with faces, if anyone has ever taken a picture of you and labeled your face in Photos their phone could pick you out of a crowd. If you've been ok with those features I don't think also checking for illegal images is too bad...