@@ -3841,9 +3841,15 @@ it("keeps the working header in place across worktree setup handoff", () => {
 });
 
 describe("failed turn transcript", () => {
-  it.each(["provider_error", "usage_limit"] as const)(
-    "keeps historical %s failures and preceding work visible without disclosures",
-    (failureClass) => {
+  it.each([
+    { position: "historical", failureClass: "provider_error" },
+    { position: "historical", failureClass: "usage_limit" },
+    { position: "latest", failureClass: "usage_limit" },
+  ] as const)(
+    "keeps $position $failureClass failures visible with preceding work grouped appropriately",
+    ({ position, failureClass }) => {
+      const isLatest = position === "latest";
+      const commands = isLatest ? ["pwd", "ls", "false"] : ["pwd"];
       const runId = RunId.make("failed-run");
       const threadId = ThreadId.make("failed-thread");
       const at = DateTime.makeUnsafe("2026-09-20T12:00:00Z");
@@ -3880,23 +3886,24 @@ describe("failed turn transcript", () => {
             attachments: [],
           },
         },
-        {
-          position: 1,
+        ...commands.map((input, index): OrchestrationV2ProjectedTurnItem => ({
+          position: index + 1,
           visibility: "local",
           sourceThreadId: threadId,
-          sourceItemId: TurnItemId.make("command"),
+          sourceItemId: TurnItemId.make(index === 0 ? "command" : `command-${index}`),
           item: {
             ...base,
-            id: TurnItemId.make("command"),
+            id: TurnItemId.make(index === 0 ? "command" : `command-${index}`),
+            ordinal: index + 1,
             type: "command_execution",
             status: "completed",
-            input: "pwd",
+            input,
             output: "",
             exitCode: 0,
           },
-        },
+        })),
         {
-          position: 2,
+          position: commands.length + 1,
           visibility: "local",
           sourceThreadId: threadId,
           sourceItemId: TurnItemId.make("failure"),
@@ -3918,37 +3925,44 @@ describe("failed turn transcript", () => {
         timelineEntries: deriveTimelineEntriesFromVisibleTurnItems({
           visibleTurnItems: items,
           optimisticMessages: [],
-        }).map((entry) => ({
-          ...entry,
-          attempt: {
-            id: RunAttemptId.make("superseded-attempt"),
-            runId,
-            attemptOrdinal: 1,
-            rootNodeId: NodeId.make("superseded-root"),
-            status: "superseded" as const,
-            completedAt: null,
-          },
-        })),
+        }).map((entry) =>
+          isLatest
+            ? entry
+            : {
+                ...entry,
+                attempt: {
+                  id: RunAttemptId.make("superseded-attempt"),
+                  runId,
+                  attemptOrdinal: 1,
+                  rootNodeId: NodeId.make("superseded-root"),
+                  status: "superseded" as const,
+                  completedAt: null,
+                },
+              },
+        ),
         latestRun: {
-          runId: RunId.make("newer-run"),
-          status: "completed",
+          runId: isLatest ? runId : RunId.make("newer-run"),
+          status: isLatest ? "failed" : "completed",
           startedAt: DateTime.formatIso(at),
           completedAt: DateTime.formatIso(at),
         },
         isWorking: false,
         turnDiffSummaries: [],
         supportsConversationRollback: false,
       });
-      expect(
-        rows.some(
-          (row) =>
-            row.kind === "turn-fold" || row.kind === "attempt-fold" || row.kind === "work-toggle",
-        ),
-      ).toBe(false);
+      expect(rows.some((row) => row.kind === "turn-fold" || row.kind === "attempt-fold")).toBe(
+        false,
+      );
       const work = rows.flatMap((row) => (row.kind === "work" ? row.groupedEntries : []));
-      expect(work.map((entry) => entry.id)).toEqual(["command", "failure"]);
+      expect(rows.find((row) => row.kind === "work-toggle")).toEqual(
+        isLatest ? expect.objectContaining({ hiddenCount: 3, expanded: false }) : undefined,
+      );
+      expect(work.map((entry) => entry.id)).toEqual(
+        isLatest ? ["failure"] : ["command", "failure"],
+      );
       expect(work.at(-1)?.detail).toBe("The provider stopped this turn.\nRetry later.");
       expect(work.at(-1)?.createdAt).toBe("2026-09-20T12:00:00.000Z");
+      if (isLatest) return;
       const entriesWithoutTools = deriveTimelineEntriesFromVisibleTurnItems({
         visibleTurnItems: items.filter((row) => row.item.type !== "command_execution"),
         optimisticMessages: [],
 
@@ -973,6 +973,24 @@ function failedTimelineRunIds(
   return failed;
 }
 
+/** Usage-limit pauses keep their tool groups; any other failure itemizes the run's work. */
+function itemizedFailedRunIds(
+  entries: ReadonlyArray<TimelineEntry>,
+  failedRunIds: ReadonlySet<RunId>,
+) {
+  const usageLimited = new Set<RunId>();
+  const otherFailures = new Set<RunId>();
+  for (const entry of entries) {
+    const item = timelineEntryFailedItem(entry);
+    if (item?.runId) {
+      (item.failure.class === "usage_limit" ? usageLimited : otherFailures).add(item.runId);
+    }
+  }
+  return new Set(
+    [...failedRunIds].filter((runId) => !usageLimited.has(runId) || otherFailures.has(runId)),
+  );
+}
+
 function deriveTurnFolds(input: {
   timelineEntries: ReadonlyArray<TimelineEntry>;
   terminalAssistantMessageIds: ReadonlySet<string>;
@@ -1410,6 +1428,7 @@ export function deriveMessagesTimelineRows(input: {
   const nextRows: MessagesTimelineRow[] = [];
   const terminalAssistantMessageIds = deriveTerminalAssistantMessageIds(timelineEntries);
   const failedRunIds = failedTimelineRunIds(timelineEntries, input.latestRun ?? null);
+  const itemizedRunIds = itemizedFailedRunIds(timelineEntries, failedRunIds);
   const liveSubagentEntryIds = liveSubagentCardEntryIds(timelineEntries);
   const completeSupersededReplyIds = completeSupersededReplyEntryIds(timelineEntries);
   const supersededFoldsByAnchorEntryId = deriveSupersededAttemptFolds(
@@ -1772,7 +1791,7 @@ export function deriveMessagesTimelineRows(input: {
     if (timelineEntry.kind === "work") {
       if (
         isPendingApproval(timelineEntry.entry) ||
-        (timelineEntry.entry.runId != null && failedRunIds.has(timelineEntry.entry.runId)) ||
+        (timelineEntry.entry.runId != null && itemizedRunIds.has(timelineEntry.entry.runId)) ||
         (timelineEntry.entry.itemType === "error" &&
           timelineEntry.entry.toolLifecycleStatus === "failed") ||
         timelineEntry.entry.tone === "error" ||
@@ -1798,6 +1817,8 @@ export function deriveMessagesTimelineRows(input: {
           !nextEntry ||
           nextEntry.kind !== "work" ||
           nextEntry.entry.sourceActivityKind === "context-compaction" ||
+          (nextEntry.entry.itemType === "error" &&
+            nextEntry.entry.toolLifecycleStatus === "failed") ||
           nextEntry.entry.tone === "error" ||
           nextEntry.entry.sourceActivityKind === "runtime.error" ||
           nextEntry.entry.itemType === "system_notice" ||