[BUG] Managed settings defaultMode is no longer respected

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?

Since the change on August 14, the "defaultMode" setting in our organisation's managed settings.json is no longer respected. Claude Code (CLI) launches into auto mode regardless of the value specified in the managed settings.json.

What Should Happen?

The defaultMode specified in the organisation's managed settings.json should take precedence.

Steps to Reproduce

1. Set a defaultMode in the organisation's managed settings (e.g. "defaultMode": "plan").
2. Launch claude.
3. Claude launches in Auto mode.

Is this a regression?

Yes, this worked in a previous version

Last Working Version

Unsure

Claude Code Version

2.1.241 (Claude Code)

Platform

Anthropic API

Operating System

Ubuntu/Debian Linux

Terminal/Shell

VS Code integrated terminal