Anthropic API Policy Violation Detection Incorrectly Blocking All User Inputs

Bug Description
Claude Code falsely flags every prompt as policy violation - even just typing 'test' triggers the error, rendering it completely unusable. First started when reading legitimate tech docs, now blocks all inputs and persists across new sessions.

Environment Info

• Platform: win32
• Terminal: vscode
• Version: 1.0.65
• Feedback ID: 01717da1-b3a3-4de8-abb3-1e5ca5cda72a

Errors

[API Error: Claude Code is unable to respond to this request, which appears to violate our Usage Policy (https://www.anthropic.com/legal/aup). Please double press esc to edit your last message or start a new session for Claude Code to assist with a different task.]