diff --git a/webui/src/App.tsx b/webui/src/App.tsx
index 44a155b..8704e6b 100644
--- a/webui/src/App.tsx
+++ b/webui/src/App.tsx
@@ -30,9 +30,9 @@ function App() {
 
   const handleSaveInstance = (name: string, options: CreateInstanceOptions) => {
     if (editingInstance) {
-      updateInstance(editingInstance.name, options);
+      void updateInstance(editingInstance.name, options);
     } else {
-      createInstance(name, options);
+      void createInstance(name, options);
     }
   };
 
diff --git a/webui/src/__tests__/App.test.tsx b/webui/src/__tests__/App.test.tsx
index 04c1e34..57f00a0 100644
--- a/webui/src/__tests__/App.test.tsx
+++ b/webui/src/__tests__/App.test.tsx
@@ -46,8 +46,8 @@ function renderApp() {
 
 describe('App Component - Critical Business Logic Only', () => {
   const mockInstances: Instance[] = [
-    { name: 'test-instance-1', running: false, options: { model: 'model1.gguf' } },
-    { name: 'test-instance-2', running: true, options: { model: 'model2.gguf' } }
+    { name: 'test-instance-1', status: 'stopped', options: { model: 'model1.gguf' } },
+    { name: 'test-instance-2', status: 'running', options: { model: 'model2.gguf' } }
   ]
 
   beforeEach(() => {
@@ -81,7 +81,7 @@ describe('App Component - Critical Business Logic Only', () => {
       const user = userEvent.setup()
       const newInstance: Instance = {
         name: 'new-test-instance',
-        running: false,
+        status: 'stopped',
         options: { model: 'new-model.gguf' }
       }
       vi.mocked(instancesApi.create).mockResolvedValue(newInstance)
@@ -118,7 +118,7 @@ describe('App Component - Critical Business Logic Only', () => {
       const user = userEvent.setup()
       const updatedInstance: Instance = {
         name: 'test-instance-1',
-        running: false,
+        status: 'stopped',
         options: { model: 'updated-model.gguf' }
       }
       vi.mocked(instancesApi.update).mockResolvedValue(updatedInstance)
diff --git a/webui/src/components/HealthBadge.tsx b/webui/src/components/HealthBadge.tsx
index 4bc0cfb..45c1960 100644
--- a/webui/src/components/HealthBadge.tsx
+++ b/webui/src/components/HealthBadge.tsx
@@ -27,6 +27,8 @@ const HealthBadge: React.FC<HealthBadgeProps> = ({ health }) => {
         return <XCircle className="h-3 w-3" />;
       case "unknown":
         return <Loader2 className="h-3 w-3 animate-spin" />;
+      case "failed":
+        return <XCircle className="h-3 w-3" />;
     }
   };
 
@@ -40,6 +42,8 @@ const HealthBadge: React.FC<HealthBadgeProps> = ({ health }) => {
         return "destructive";
       case "unknown":
         return "secondary";
+      case "failed":
+        return "destructive";
     }
   };
 
@@ -53,6 +57,8 @@ const HealthBadge: React.FC<HealthBadgeProps> = ({ health }) => {
         return "Error";
       case "unknown":
         return "Unknown";
+      case "failed":
+        return "Failed";
     }
   };
 
diff --git a/webui/src/components/InstanceCard.tsx b/webui/src/components/InstanceCard.tsx
index 5ecfcb2..b17714c 100644
--- a/webui/src/components/InstanceCard.tsx
+++ b/webui/src/components/InstanceCard.tsx
@@ -24,7 +24,7 @@ function InstanceCard({
   editInstance,
 }: InstanceCardProps) {
   const [isLogsOpen, setIsLogsOpen] = useState(false);
-  const health = useInstanceHealth(instance.name, instance.running);
+  const health = useInstanceHealth(instance.name, instance.status);
 
   const handleStart = () => {
     startInstance(instance.name);
@@ -50,13 +50,15 @@ function InstanceCard({
     setIsLogsOpen(true);
   };
 
+  const running = instance.status === "running";
+
   return (
     <>
       <Card>
         <CardHeader className="pb-3">
           <div className="flex items-center justify-between">
             <CardTitle className="text-lg">{instance.name}</CardTitle>
-            {instance.running && <HealthBadge health={health} />}
+            {running && <HealthBadge health={health} />}
           </div>
         </CardHeader>
 
@@ -66,7 +68,7 @@ function InstanceCard({
               size="sm"
               variant="outline"
               onClick={handleStart}
-              disabled={instance.running}
+              disabled={running}
               title="Start instance"
               data-testid="start-instance-button"
             >
@@ -77,7 +79,7 @@ function InstanceCard({
               size="sm"
               variant="outline"
               onClick={handleStop}
-              disabled={!instance.running}
+              disabled={!running}
               title="Stop instance"
               data-testid="stop-instance-button"
             >
@@ -108,7 +110,7 @@ function InstanceCard({
               size="sm"
               variant="destructive"
               onClick={handleDelete}
-              disabled={instance.running}
+              disabled={running}
               title="Delete instance"
               data-testid="delete-instance-button"
             >
@@ -122,7 +124,7 @@ function InstanceCard({
         open={isLogsOpen}
         onOpenChange={setIsLogsOpen}
         instanceName={instance.name}
-        isRunning={instance.running}
+        isRunning={running}
       />
     </>
   );
diff --git a/webui/src/components/InstanceDialog.tsx b/webui/src/components/InstanceDialog.tsx
index 9542a8c..56792e6 100644
--- a/webui/src/components/InstanceDialog.tsx
+++ b/webui/src/components/InstanceDialog.tsx
@@ -29,7 +29,6 @@ const InstanceDialog: React.FC<InstanceDialogProps> = ({
   instance,
 }) => {
   const isEditing = !!instance;
-  const isRunning = instance?.running || true; // Assume running if instance exists
 
   const [instanceName, setInstanceName] = useState("");
   const [formData, setFormData] = useState<CreateInstanceOptions>({});
@@ -114,6 +113,16 @@ const InstanceDialog: React.FC<InstanceDialogProps> = ({
   // Check if auto_restart is enabled
   const isAutoRestartEnabled = formData.auto_restart === true;
 
+  // Save button label logic
+  let saveButtonLabel = "Create Instance";
+  if (isEditing) {
+    if (instance?.status === "running") {
+      saveButtonLabel = "Update & Restart Instance";
+    } else {
+      saveButtonLabel = "Update Instance";
+    }
+  }
+
   return (
     <Dialog open={open} onOpenChange={onOpenChange}>
       <DialogContent className="sm:max-w-[600px] max-h-[80vh] overflow-hidden flex flex-col">
@@ -264,11 +273,7 @@ const InstanceDialog: React.FC<InstanceDialogProps> = ({
             disabled={!instanceName.trim() || !!nameError}
             data-testid="dialog-save-button"
           >
-            {isEditing
-              ? isRunning
-                ? "Update & Restart Instance"
-                : "Update Instance"
-              : "Create Instance"}
+            {saveButtonLabel}
           </Button>
         </DialogFooter>
       </DialogContent>
diff --git a/webui/src/components/__tests__/InstanceCard.test.tsx b/webui/src/components/__tests__/InstanceCard.test.tsx
index 4429e4f..5daebe4 100644
--- a/webui/src/components/__tests__/InstanceCard.test.tsx
+++ b/webui/src/components/__tests__/InstanceCard.test.tsx
@@ -17,13 +17,13 @@ describe('InstanceCard - Instance Actions and State', () => {
 
   const stoppedInstance: Instance = {
     name: 'test-instance',
-    running: false,
+    status: 'stopped',
     options: { model: 'test-model.gguf' }
   }
 
   const runningInstance: Instance = {
     name: 'running-instance',
-    running: true,
+    status: 'running',
     options: { model: 'running-model.gguf' }
   }
 
@@ -301,7 +301,7 @@ afterEach(() => {
     it('handles instance with minimal data', () => {
       const minimalInstance: Instance = {
         name: 'minimal',
-        running: false,
+        status: 'stopped',
         options: {}
       }
 
@@ -323,7 +323,7 @@ afterEach(() => {
     it('handles instance with undefined options', () => {
       const instanceWithoutOptions: Instance = {
         name: 'no-options',
-        running: true,
+        status: 'running',
         options: undefined
       }
 
diff --git a/webui/src/components/__tests__/InstanceList.test.tsx b/webui/src/components/__tests__/InstanceList.test.tsx
index b237987..a38f873 100644
--- a/webui/src/components/__tests__/InstanceList.test.tsx
+++ b/webui/src/components/__tests__/InstanceList.test.tsx
@@ -44,9 +44,9 @@ describe('InstanceList - State Management and UI Logic', () => {
   const mockEditInstance = vi.fn()
 
   const mockInstances: Instance[] = [
-    { name: 'instance-1', running: false, options: { model: 'model1.gguf' } },
-    { name: 'instance-2', running: true, options: { model: 'model2.gguf' } },
-    { name: 'instance-3', running: false, options: { model: 'model3.gguf' } }
+    { name: 'instance-1', status: 'stopped', options: { model: 'model1.gguf' } },
+    { name: 'instance-2', status: 'running', options: { model: 'model2.gguf' } },
+    { name: 'instance-3', status: 'stopped', options: { model: 'model3.gguf' } }
   ]
 
   const DUMMY_API_KEY = 'test-api-key-123'
diff --git a/webui/src/components/__tests__/InstanceModal.test.tsx b/webui/src/components/__tests__/InstanceModal.test.tsx
index 926d214..8468379 100644
--- a/webui/src/components/__tests__/InstanceModal.test.tsx
+++ b/webui/src/components/__tests__/InstanceModal.test.tsx
@@ -134,7 +134,7 @@ afterEach(() => {
   describe('Edit Mode', () => {
     const mockInstance: Instance = {
       name: 'existing-instance',
-      running: false,
+      status: 'stopped',
       options: {
         model: 'test-model.gguf',
         gpu_layers: 10,
@@ -184,8 +184,8 @@ afterEach(() => {
     })
 
     it('shows correct button text for running vs stopped instances', () => {
-      const runningInstance: Instance = { ...mockInstance, running: true }
-      
+      const runningInstance: Instance = { ...mockInstance, status: 'running' }
+
       const { rerender } = render(
         <InstanceDialog
           open={true}
diff --git a/webui/src/contexts/InstancesContext.tsx b/webui/src/contexts/InstancesContext.tsx
index 8340bd9..1aa1bd7 100644
--- a/webui/src/contexts/InstancesContext.tsx
+++ b/webui/src/contexts/InstancesContext.tsx
@@ -112,9 +112,9 @@ export const InstancesProvider = ({ children }: InstancesProviderProps) => {
     try {
       setError(null)
       await instancesApi.start(name)
-      
-      // Update only this instance's running status
-      updateInstanceInMap(name, { running: true })
+
+      // Update only this instance's status
+      updateInstanceInMap(name, { status: "running" })
     } catch (err) {
       setError(err instanceof Error ? err.message : 'Failed to start instance')
     }
@@ -124,9 +124,9 @@ export const InstancesProvider = ({ children }: InstancesProviderProps) => {
     try {
       setError(null)
       await instancesApi.stop(name)
-      
-      // Update only this instance's running status
-      updateInstanceInMap(name, { running: false })
+
+      // Update only this instance's status
+      updateInstanceInMap(name, { status: "stopped" })
     } catch (err) {
       setError(err instanceof Error ? err.message : 'Failed to stop instance')
     }
@@ -136,9 +136,9 @@ export const InstancesProvider = ({ children }: InstancesProviderProps) => {
     try {
       setError(null)
       await instancesApi.restart(name)
-      
-      // Update only this instance's running status
-      updateInstanceInMap(name, { running: true })
+
+      // Update only this instance's status
+      updateInstanceInMap(name, { status: "running" })
     } catch (err) {
       setError(err instanceof Error ? err.message : 'Failed to restart instance')
     }
diff --git a/webui/src/contexts/__tests__/InstancesContext.test.tsx b/webui/src/contexts/__tests__/InstancesContext.test.tsx
index aa4e8e3..c271730 100644
--- a/webui/src/contexts/__tests__/InstancesContext.test.tsx
+++ b/webui/src/contexts/__tests__/InstancesContext.test.tsx
@@ -41,7 +41,7 @@ function TestComponent() {
       <div data-testid="instances-count">{instances.length}</div>
       {instances.map((instance) => (
         <div key={instance.name} data-testid={`instance-${instance.name}`}>
-          {instance.name}:{instance.running.toString()}
+          {instance.name}:{instance.status}
         </div>
       ))}
 
@@ -99,8 +99,8 @@ function renderWithProvider(children: ReactNode) {
 
 describe("InstancesContext", () => {
   const mockInstances: Instance[] = [
-    { name: "instance1", running: true, options: { model: "model1.gguf" } },
-    { name: "instance2", running: false, options: { model: "model2.gguf" } },
+    { name: "instance1", status: "running", options: { model: "model1.gguf" } },
+    { name: "instance2", status: "stopped", options: { model: "model2.gguf" } },
   ];
 
   beforeEach(() => {
@@ -132,10 +132,10 @@ describe("InstancesContext", () => {
         expect(screen.getByTestId("loading")).toHaveTextContent("false");
         expect(screen.getByTestId("instances-count")).toHaveTextContent("2");
         expect(screen.getByTestId("instance-instance1")).toHaveTextContent(
-          "instance1:true"
+          "instance1:running"
         );
         expect(screen.getByTestId("instance-instance2")).toHaveTextContent(
-          "instance2:false"
+          "instance2:stopped"
         );
       });
     });
@@ -158,7 +158,7 @@ describe("InstancesContext", () => {
     it("creates instance and adds it to state", async () => {
       const newInstance: Instance = {
         name: "new-instance",
-        running: false,
+        status: "stopped",
         options: { model: "test.gguf" },
       };
       vi.mocked(instancesApi.create).mockResolvedValue(newInstance);
@@ -181,7 +181,7 @@ describe("InstancesContext", () => {
       await waitFor(() => {
         expect(screen.getByTestId("instances-count")).toHaveTextContent("3");
         expect(screen.getByTestId("instance-new-instance")).toHaveTextContent(
-          "new-instance:false"
+          "new-instance:stopped"
         );
       });
     });
@@ -214,7 +214,7 @@ describe("InstancesContext", () => {
     it("updates instance and maintains it in state", async () => {
       const updatedInstance: Instance = {
         name: "instance1",
-        running: true,
+        status: "running",
         options: { model: "updated.gguf" },
       };
       vi.mocked(instancesApi.update).mockResolvedValue(updatedInstance);
@@ -251,7 +251,7 @@ describe("InstancesContext", () => {
         expect(screen.getByTestId("loading")).toHaveTextContent("false");
         // instance2 starts as not running
         expect(screen.getByTestId("instance-instance2")).toHaveTextContent(
-          "instance2:false"
+          "instance2:stopped"
         );
       });
 
@@ -262,7 +262,7 @@ describe("InstancesContext", () => {
         expect(instancesApi.start).toHaveBeenCalledWith("instance2");
         // The running state should be updated to true
         expect(screen.getByTestId("instance-instance2")).toHaveTextContent(
-          "instance2:true"
+          "instance2:running"
         );
       });
     });
@@ -276,7 +276,7 @@ describe("InstancesContext", () => {
         expect(screen.getByTestId("loading")).toHaveTextContent("false");
         // instance1 starts as running
         expect(screen.getByTestId("instance-instance1")).toHaveTextContent(
-          "instance1:true"
+          "instance1:running"
         );
       });
 
@@ -287,7 +287,7 @@ describe("InstancesContext", () => {
         expect(instancesApi.stop).toHaveBeenCalledWith("instance1");
         // The running state should be updated to false
         expect(screen.getByTestId("instance-instance1")).toHaveTextContent(
-          "instance1:false"
+          "instance1:stopped"
         );
       });
     });
@@ -383,7 +383,7 @@ describe("InstancesContext", () => {
       // Test that operations don't interfere with each other
       const newInstance: Instance = {
         name: "new-instance",
-        running: false,
+        status: "stopped",
         options: {},
       };
       vi.mocked(instancesApi.create).mockResolvedValue(newInstance);
@@ -411,7 +411,7 @@ describe("InstancesContext", () => {
         expect(screen.getByTestId("instances-count")).toHaveTextContent("3"); // Still 3
         // But the running state should change
         expect(screen.getByTestId("instance-instance2")).toHaveTextContent(
-          "instance2:true"
+          "instance2:running"
         );
       });
     });
diff --git a/webui/src/hooks/useInstanceHealth.ts b/webui/src/hooks/useInstanceHealth.ts
index ceb5271..2741ea4 100644
--- a/webui/src/hooks/useInstanceHealth.ts
+++ b/webui/src/hooks/useInstanceHealth.ts
@@ -1,14 +1,19 @@
 // ui/src/hooks/useInstanceHealth.ts
 import { useState, useEffect } from 'react'
-import type { HealthStatus } from '@/types/instance'
+import type { HealthStatus, InstanceStatus } from '@/types/instance'
 import { healthService } from '@/lib/healthService'
 
-export function useInstanceHealth(instanceName: string, isRunning: boolean): HealthStatus | undefined {
+export function useInstanceHealth(instanceName: string, instanceStatus: InstanceStatus): HealthStatus | undefined {
   const [health, setHealth] = useState<HealthStatus | undefined>()
 
   useEffect(() => {
-    if (!isRunning) {
-      setHealth(undefined)
+    if (instanceStatus == "stopped") {
+      setHealth({ status: "unknown", lastChecked: new Date() })
+      return
+    }
+      
+    if  (instanceStatus == "failed") {
+      setHealth({ status: instanceStatus, lastChecked: new Date() })
       return
     }
 
@@ -17,9 +22,9 @@ export function useInstanceHealth(instanceName: string, isRunning: boolean): Hea
       setHealth(healthStatus)
     })
 
-    // Cleanup subscription on unmount or when running changes
+    // Cleanup subscription on unmount or when instanceStatus changes
     return unsubscribe
-  }, [instanceName, isRunning])
+  }, [instanceName, instanceStatus])
 
   return health
 }
\ No newline at end of file
diff --git a/webui/src/types/instance.ts b/webui/src/types/instance.ts
index 0ebbf5f..f530f80 100644
--- a/webui/src/types/instance.ts
+++ b/webui/src/types/instance.ts
@@ -2,14 +2,16 @@ import type { CreateInstanceOptions } from '@/schemas/instanceOptions'
 
 export { type CreateInstanceOptions } from '@/schemas/instanceOptions'
 
+export type InstanceStatus = 'running' | 'stopped' | 'failed'
+
 export interface HealthStatus {
-  status: 'ok' | 'loading' | 'error' | 'unknown'
+  status: 'ok' | 'loading' | 'error' | 'unknown' | 'failed'
   message?: string
   lastChecked: Date
 }
 
 export interface Instance {
   name: string;
-  running: boolean;
+  status: InstanceStatus;
   options?: CreateInstanceOptions;
 }
\ No newline at end of file