You have a Microsoft 365 E5 subscription.

To allow Microsoft 365 Copilot to summarize files that have Label1 applied, the label must grant permission to extract content from the document. The correct permission for this is Copy and extract content (EXTRACT).

Microsoft 365 Copilot requires access to read and process content in documents to generate summaries. The EXTRACT permission allows users (and AI tools like Copilot) to copy and extract content for processing while still maintaining the protection applied by the sensitivity label.