diff --git a/.changeset/fn-7965-overseer-executor-failure-signal.md b/.changeset/fn-7965-overseer-executor-failure-signal.md
new file mode 100644
index 0000000000..e24462aeef
--- /dev/null
+++ b/.changeset/fn-7965-overseer-executor-failure-signal.md
@@ -0,0 +1,7 @@
+---
+"@runfusion/fusion": patch
+---
+
+summary: The planner overseer now notices a failed in-progress task immediately instead of after two hours.
+category: fix
+dev: FN-7965. `deriveSignalAndSources`'s `executor` branch never read `task.status`, so a row parked `status: "failed"` (e.g. the terminal fn_task_done refusal/invariant park) reported `signal: "progressing"` with reason "Task is actively executing in-progress work". `failed` was only ever derived for the merger/pull-request stages, leaving the FN-7743 2h stall proxy (`columnMovedAt ?? updatedAt`) as the sole backstop. The branch now reports `failed`, which routes into the pre-existing failed-signal policy — `retry_step` at executor stage (sources are `agent-log`, never an ERROR_SOURCE_KIND), bounded by `PLANNER_RECOVERY_MAX_ATTEMPTS` and escalated on exhaustion. `paused` keeps precedence (operator/user-paused stays `blocked`), the reason is held constant so the FN-7577 `stage|signal|reason` feed dedup still holds, and `status` was added to `OverseerTaskRef`.
diff --git a/packages/engine/src/__tests__/planner-overseer.test.ts b/packages/engine/src/__tests__/planner-overseer.test.ts
index db5d339d89..be7014dee6 100644
--- a/packages/engine/src/__tests__/planner-overseer.test.ts
+++ b/packages/engine/src/__tests__/planner-overseer.test.ts
@@ -464,3 +464,73 @@ describe("PlannerOverseerMonitor.observeTask — FN-7743 executor stall detectio
     expect(store.logEntry).toHaveBeenCalledTimes(2);
   });
 });
+
+// FNXC:PlannerOversight 2026-07-15-17:05:
+// FN-7965: a task parked `status: "failed"` at the executor stage reported
+// `progressing` ("Task is actively executing in-progress work") because the
+// derivation never read `status` — so the overseer treated a dead task as healthy
+// and only reacted once the FN-7743 stall proxy fired hours later. `failed` had
+// been derived for the merger/pull-request stages only. These tests lock the
+// invariant across the enumerated surfaces: failed (failed), failed-but-paused
+// (blocked — a human owns it), healthy (progressing, unchanged), and the
+// terminal columns that must stay unmonitored.
+describe("PlannerOverseerMonitor.observeTask — FN-7965 executor failure detection", () => {
+  it("reports failed for a non-paused in-progress task parked status=failed", async () => {
+    const monitor = new PlannerOverseerMonitor();
+    const task = taskFixture({
+      column: "in-progress",
+      status: "failed",
+      updatedAt: new Date().toISOString(),
+      columnMovedAt: new Date().toISOString(),
+    });
+
+    const observation = await monitor.observeTask(task, "autonomous");
+
+    // Must NOT wait for the 2h stall proxy: the failure is visible immediately.
+    expect(observation?.stage).toBe("executor");
+    expect(observation?.signal).toBe("failed");
+  });
+
+  it("keeps paused precedence: a paused failed task is blocked, not failed", async () => {
+    // A human owns an operator/user-paused row — it must never be routed into
+    // autonomous bounded recovery just because status is failed.
+    const monitor = new PlannerOverseerMonitor();
+    const task = taskFixture({
+      column: "in-progress",
+      status: "failed",
+      paused: true,
+      pausedReason: "error-unrecoverable",
+    });
+
+    const observation = await monitor.observeTask(task, "autonomous");
+
+    expect(observation?.signal).toBe("blocked");
+  });
+
+  it.each([undefined, null, "queued"])("still reports progressing for a healthy in-progress task (status=%s)", async (status) => {
+    // Negative control: FN-7577 — a healthy card must never flip to a problem
+    // signal, or every in-progress task shows the "recovering" badge.
+    const monitor = new PlannerOverseerMonitor();
+    const task = taskFixture({
+      column: "in-progress",
+      status: status as never,
+      updatedAt: new Date().toISOString(),
+      columnMovedAt: new Date().toISOString(),
+    });
+
+    const observation = await monitor.observeTask(task, "autonomous");
+
+    expect(observation?.signal).toBe("progressing");
+  });
+
+  it("keeps the failed reason constant so the FN-7577 feed dedup holds", async () => {
+    // The reason must not interpolate task.error/status, or an observation would
+    // be re-emitted every poll for the same unchanged failure.
+    const monitor = new PlannerOverseerMonitor();
+    const a = await monitor.observeTask(taskFixture({ id: "FN-1000", status: "failed" }), "autonomous");
+    const b = await monitor.observeTask(taskFixture({ id: "FN-1000", status: "failed" }), "autonomous");
+
+    expect(a?.reason).toBe(b?.reason);
+    expect(a?.reason).not.toMatch(/failed:|error/i);
+  });
+});
diff --git a/packages/engine/src/planner-overseer.ts b/packages/engine/src/planner-overseer.ts
index c2063e3d65..00ca7d515d 100644
--- a/packages/engine/src/planner-overseer.ts
+++ b/packages/engine/src/planner-overseer.ts
@@ -55,6 +55,7 @@ export type OverseerTaskRef = Pick<
   Task,
   | "id"
   | "column"
+  | "status"
   | "prInfo"
   | "reviewState"
   | "paused"
@@ -180,6 +181,21 @@ function deriveSignalAndSources(
         };
       }
 
+      /*
+      FNXC:PlannerOversight 2026-07-15-17:05:
+      FN-7965: an executor-stage row parked `status: "failed"` (e.g. the terminal fn_task_done refusal/invariant park) reported `progressing` — "Task is actively executing in-progress work" — because nothing here read `status`. The overseer observed a dead task as healthy and took no action; `failed` was only ever derived for the merger/pull-request stages, so the sole backstop was the FN-7743 stall proxy below firing HOURS later. Read the status so bounded recovery engages on the next poll instead.
+      `paused` deliberately keeps precedence above: an operator/user-paused row is `blocked` because a human owns it, not an autonomously recoverable failure.
+      Downstream this yields `retry_step` (executor sources are `agent-log`, never an ERROR_SOURCE_KIND), bounded by `PLANNER_RECOVERY_MAX_ATTEMPTS` and then escalated on exhaustion — the pre-existing failed-signal policy, not a new one.
+      The reason must stay CONSTANT per (stage|signal): the FN-7577 feed dedup keys on `stage|signal|reason`, so never interpolate `task.error`/`status` here — a per-failure string would re-emit an observation every poll.
+      */
+      if (task.status === "failed") {
+        return {
+          signal: "failed",
+          reason: "Executor stage parked failed with work incomplete",
+          sources: [{ kind: "agent-log", ref: taskId }],
+        };
+      }
+
       // FNXC:PlannerOversight 2026-07-09-00:00:
       // FN-7743: a non-paused in-progress task whose executor session has gone
       // silent (dead/hung agent, no commits/heartbeat) was previously ALWAYS