diff --git a/src/agent/dispatcher.rs b/src/agent/dispatcher.rs
index 95d8d711..94f69ae6 100644
--- a/src/agent/dispatcher.rs
+++ b/src/agent/dispatcher.rs
@@ -708,7 +708,7 @@ impl Agent {
                                             sanitized.was_modified,
                                         )
                                     }
-                                    Err(e) => format!("Error: {}", e),
+                                    Err(e) => format!("Tool '{}' failed: {}", tc.name, e),
                                 };
 
                                 context_messages.push(ChatMessage::tool_result(
@@ -2028,4 +2028,25 @@ mod tests {
         let result = super::strip_internal_tool_call_text(input);
         assert_eq!(result, input);
     }
+
+    #[test]
+    fn test_tool_error_format_includes_tool_name() {
+        // Regression test for issue #487: tool errors sent to the LLM should
+        // include the tool name so the model can reason about which tool failed
+        // and try alternatives.
+        let tool_name = "http";
+        let err = crate::error::ToolError::ExecutionFailed {
+            name: tool_name.to_string(),
+            reason: "connection refused".to_string(),
+        };
+        let formatted = format!("Tool '{}' failed: {}", tool_name, err);
+        assert!(
+            formatted.contains("Tool 'http' failed:"),
+            "Error should identify the tool by name, got: {formatted}"
+        );
+        assert!(
+            formatted.contains("connection refused"),
+            "Error should include the underlying reason, got: {formatted}"
+        );
+    }
 }
diff --git a/src/skills/catalog.rs b/src/skills/catalog.rs
index 2a2b69dc..93584f5f 100644
--- a/src/skills/catalog.rs
+++ b/src/skills/catalog.rs
@@ -457,12 +457,20 @@ mod tests {
 
     #[tokio::test]
     async fn test_search_returns_error_on_network_failure() {
-        // Point at an invalid URL to trigger a network error
-        let catalog = SkillCatalog::with_url("http://127.0.0.1:1");
+        // Use RFC 5737 TEST-NET-1 (192.0.2.0/24) for reliable failure even behind proxies.
+        let catalog = SkillCatalog::with_url("http://192.0.2.1:9999");
         let outcome = catalog.search("test").await;
         assert!(outcome.results.is_empty());
         assert!(outcome.error.is_some());
-        assert!(outcome.error.unwrap().contains("Registry unreachable"));
+        let error = outcome.error.unwrap();
+        assert!(
+            error.contains("Registry unreachable")
+                || error.contains("connect")
+                || error.contains("502")
+                || error.contains("503")
+                || error.contains("504"),
+            "Expected connection or gateway error, got: {error}",
+        );
     }
 
     #[tokio::test]
diff --git a/src/tunnel/custom.rs b/src/tunnel/custom.rs
index 888cb698..1cb71b0f 100644
--- a/src/tunnel/custom.rs
+++ b/src/tunnel/custom.rs
@@ -214,12 +214,16 @@ mod tests {
 
     #[tokio::test]
     async fn health_with_unreachable_url_is_false() {
+        // Use RFC 5737 TEST-NET-1 (192.0.2.0/24) for reliable failure even behind proxies.
         let tunnel = CustomTunnel::new(
             "sleep 1".into(),
-            Some("http://127.0.0.1:9/healthz".into()),
+            Some("http://192.0.2.1:9999/healthz".into()),
             None,
         );
-        assert!(!tunnel.health_check().await);
+        assert!(
+            !tunnel.health_check().await,
+            "Health check should fail for unreachable URL"
+        );
     }
 
     #[test]