During testimony at the civil trial, Swift's attorney Douglas Baldridge repeatedly asked David Mueller why his right hand was behind Swift in the 2013 photo op.
Mueller said his hand was touching Swift's skirt after he put his arm around her and their arms got crossed.
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"My hand was at rib-cage level and apparently it went down," Mueller said.
In the image, shown to jurors during opening statements, Mueller's hand is behind Swift, just below her waist. Both are smiling.
One of Mueller's lawyers, Gabriel McFarland, told jurors that the photo does not show Mueller's hand under Swift's skirt and that the skirt was not rumpled.
Baldridge, however, said several people noticed the pop star was upset after meeting with Mueller.
Her bodyguard Greg Dent has testified in a deposition that he had seen Mueller lift Swift's skirt, the lawyer told jurors.
In addition, Baldridge quoted a deposition by Swift's photographer Stephanie Simbeck, who said Swift uttered "that guy" had grabbed her behind.
Dent and Simbeck are listed as possible witnesses at the trial.
Mueller has sued Swift, claiming he was falsely accused and then fired over her allegation. He is seeking at least $3 million.
Swift has countersued, claiming she was sexually assaulted. She is seeking a symbolic $1, saying she wants to serve as an example to other women who have been assaulted.
On Tuesday, Mueller testified that one of his radio station bosses, Hershel Coomer, said he had met Swift earlier before the show and that "he told me that he had his hands on her butt."
Mueller said, "I thought he was just telling me one of his stories."
Coomer is also expected to testify.
Baldridge told jurors in his opening statement that Swift is "absolutely certain" she was sexually assaulted by Mueller, and the photo is "damning" proof of it.
The proceedings on Wednesday were delayed for nearly two hours while the judge held a closed hearing with lawyers to discuss unspecified evidence in the case.
About a dozen fans lined up outside the courthouse to watch the trial, including a couple in their 20s who drove all night from Provo, Utah, to attend.
"I'm her biggest fan," said 21-year-old Lauren Simpson. "I know her cat's names, I know her birthday. I know any Taylor Swift fact that you can ask me. She's the best. This is my chance."
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