Yes, it does seem like occupied France surrendered to the Allies, All territory in France (not Vichy) became allied, except German occupied spaces. Not like the liberation of France, but more like the surrender of France, to the Allies?
But:
Paris is German occupied.
French can''t build
Or spend Diplomacy points
But France (Denmark) does get production points for French cities not occupied by the Germans.
And it happened again if I reloaded right before the German turn.
But didn't happen again if I reloaded back two turns.
So, yes, very confusing.
But seems very rare.