[BUG] defaultMode "plan" blocks entire session with "Auto mode is unavailable for your plan"

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

When defaultMode is set to "plan" in ~/.claude/settings.json, every message returns only "Auto mode is unavailable for your plan". No actual response is produced. The session is completely unusable.

This happens in both the CLI and VS Code extension. Auto mode was never requested — only plan mode.

The error also persists even after changing defaultMode back to "default". Only opening a completely new context window resolves it.

What Should Happen?

Plan mode should work independently of auto mode eligibility. Plan mode requires manual approval of tool calls and has no logical dependency on auto mode. Messages should be processed normally when defaultMode is set to "plan".

Error Messages/Logs

Auto mode is unavailable for your plan

Steps to Reproduce

1. Set "defaultMode": "plan" in ~/.claude/settings.json:

{
  "permissions": {
    "defaultMode": "plan"
  },
  "skipAutoPermissionPrompt": true
}

1. Launch claude (CLI) or open Claude Code in VS Code
2. Type any message (e.g., "hello")
3. Only response is: "Auto mode is unavailable for your plan"
4. Change defaultMode to "default" — error persists in the same session
5. Open a new context window in default mode — it works fine

Claude Model

Not sure / Multiple models

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.90

Platform

Other

Operating System

Windows

Terminal/Shell

VS Code integrated terminal

Additional Information

Using Claude Max subscription (not API, not Team/Enterprise). The setting skipAutoPermissionPrompt: true has no effect on this bug. The defaultMode: "plan" is a valid enum value per the settings schema. It appears plan mode internally triggers an auto mode availability check, which fails and blocks the entire session instead of falling back to standard plan behavior.

Version: 2.1.90
Platform: Windows 11 Pro
Shell: VS Code integrated terminal