diff --git a/strix/core/execution.py b/strix/core/execution.py
index c8ab54ce..7272a8fe 100644
--- a/strix/core/execution.py
+++ b/strix/core/execution.py
@@ -603,6 +603,11 @@ async def _run_cycle(  # noqa: PLR0912, PLR0915
                 return await _handle_content_guardrail(
                     coordinator, agent_id, exc, interactive=interactive
                 )
+            if isinstance(exc, ProviderRefusalError):
+                logger.warning("agent %s refused by the model provider: %s", agent_id, exc)
+                await coordinator.set_status(agent_id, "failed", error=str(exc))
+                await _notify_parent_on_terminal(coordinator, agent_id, "failed")
+                return None
             if not interactive:
                 raise
             if isinstance(exc, MaxTurnsExceeded):
diff --git a/tests/test_execution.py b/tests/test_execution.py
index 99712d9f..8fa043f1 100644
--- a/tests/test_execution.py
+++ b/tests/test_execution.py
@@ -599,6 +599,41 @@ async def test_structured_provider_refusal_fails_interactive_agent(
     assert coordinator.errors["root"] == refusal
 
 
+@pytest.mark.asyncio
+async def test_structured_provider_refusal_fails_noninteractive_child(
+    tmp_path: Any,
+    monkeypatch: pytest.MonkeyPatch,
+) -> None:
+    refusal = "This request was blocked under the provider's usage policy."
+    stream = _StructuredRefusalStream(refusal)
+    monkeypatch.setattr(execution.Runner, "run_streamed", lambda *_args, **_kwargs: stream)
+    coordinator = AgentCoordinator()
+    await coordinator.register("root", "strix", parent_id=None)
+    await coordinator.register("child", "recon", parent_id="root")
+    session = SQLiteSession("root", tmp_path / "agents.db")
+    await coordinator.attach_runtime("root", session=session)
+
+    result = await execution._run_cycle(
+        MagicMock(),
+        coordinator,
+        "child",
+        input_data="task",
+        run_config=MagicMock(),
+        context={"parent_id": "root"},
+        max_turns=5,
+        session=None,
+        interactive=False,
+        event_sink=None,
+        hooks=None,
+    )
+
+    assert result is None
+    assert coordinator.statuses["child"] == "failed"
+    assert coordinator.errors["child"] == refusal
+    assert coordinator.pending_counts.get("root", 0) > 0
+    session.close()
+
+
 @pytest.mark.asyncio
 async def test_resume_revives_guardrail_parked_child_but_not_plain_waiting(
     tmp_path: Any, monkeypatch: pytest.MonkeyPatch