diff --git a/src/ModularPipelines/Engine/ModuleExecutionPipeline.cs b/src/ModularPipelines/Engine/ModuleExecutionPipeline.cs
index 061871c3fb..efc22589b6 100644
--- a/src/ModularPipelines/Engine/ModuleExecutionPipeline.cs
+++ b/src/ModularPipelines/Engine/ModuleExecutionPipeline.cs
@@ -678,29 +678,10 @@ private async Task<ModuleResult<T>> HandleException<T>(
 
         executionContext.Exception = exception;
 
-        // Check for timeout - use the enhanced exception type for detailed logging
-        if (exception is ModuleTimeoutException timeoutException)
-        {
-            executionContext.Status = Status.TimedOut;
+        executionContext.Status = ClassifyException(config, executionContext, exception);
 
-            // Log additional timeout details
-            if (!timeoutException.WasCancellationTokenRespected)
-            {
-                logger.LogWarning(
-                    "Module {ModuleName} did not complete within the cancellation grace period; timeout enforcement stopped waiting after {ElapsedTime}",
-                    executionContext.ModuleType.Name,
-                    timeoutException.ElapsedTime.ToDisplayString());
-            }
-        }
-        else if (IsTimeout(config, executionContext, exception))
-        {
-            executionContext.Status = Status.TimedOut;
-        }
-
-        // Check for pipeline cancellation
-        else if (IsPipelineCancelled(exception))
+        if (executionContext.Status == Status.PipelineTerminated)
         {
-            executionContext.Status = Status.PipelineTerminated;
             logger.LogInformation("Pipeline has been canceled");
 
             var cancelledResult = ModuleResult<T>.CreateFailure(exception, executionContext);
@@ -708,9 +689,17 @@ private async Task<ModuleResult<T>> HandleException<T>(
             executionContext.SetTypedResult(cancelledResult);
             return cancelledResult;
         }
-        else
+
+        // Use the enhanced exception type for detailed timeout logging.
+        if (exception is ModuleTimeoutException timeoutException)
         {
-            executionContext.Status = Status.Failed;
+            if (!timeoutException.WasCancellationTokenRespected)
+            {
+                logger.LogWarning(
+                    "Module {ModuleName} did not complete within the cancellation grace period; timeout enforcement stopped waiting after {ElapsedTime}",
+                    executionContext.ModuleType.Name,
+                    timeoutException.ElapsedTime.ToDisplayString());
+            }
         }
 
         // Check if we should ignore failures
@@ -751,6 +740,23 @@ await SaveResults(
         throw exception;
     }
 
+    private Status ClassifyException(
+        ModuleConfiguration config,
+        ModuleExecutionContext executionContext,
+        Exception exception)
+    {
+        if (!config.AlwaysRun
+            && _engineCancellationToken.IsCancelled
+            && exception is OperationCanceledException or ModuleTimeoutException)
+        {
+            return Status.PipelineTerminated;
+        }
+
+        return exception is ModuleTimeoutException || IsTimeout(config, executionContext, exception)
+            ? Status.TimedOut
+            : Status.Failed;
+    }
+
     private bool IsTimeout(ModuleConfiguration config, ModuleExecutionContext executionContext, Exception exception)
     {
         var timeout = GetTimeout(config);
@@ -760,13 +766,7 @@ private bool IsTimeout(ModuleConfiguration config, ModuleExecutionContext execut
         }
 
         var isTimeoutExceeded = executionContext.Stopwatch.Elapsed >= timeout;
-        return isTimeoutExceeded && exception is ModuleTimeoutException or TaskCanceledException or OperationCanceledException;
-    }
-
-    private bool IsPipelineCancelled(Exception exception)
-    {
-        return exception is TaskCanceledException or OperationCanceledException or ModuleTimeoutException
-               && _engineCancellationToken.IsCancelled;
+        return isTimeoutExceeded && exception is OperationCanceledException;
     }
 
     private void CancelPipelineAndThrow(
diff --git a/test/ModularPipelines.UnitTests/Engine/ModuleExecutionPipelineTests.cs b/test/ModularPipelines.UnitTests/Engine/ModuleExecutionPipelineTests.cs
index c5a5b72a0f..1cff922f5b 100644
--- a/test/ModularPipelines.UnitTests/Engine/ModuleExecutionPipelineTests.cs
+++ b/test/ModularPipelines.UnitTests/Engine/ModuleExecutionPipelineTests.cs
@@ -2,9 +2,11 @@
 using ModularPipelines.Context;
 using ModularPipelines.Context.Domains;
 using ModularPipelines.Caching;
+using ModularPipelines.Configuration;
 using ModularPipelines.Engine;
 using ModularPipelines.Engine.Execution;
 using ModularPipelines.Enums;
+using ModularPipelines.Exceptions;
 using ModularPipelines.Helpers;
 using ModularPipelines.Logging;
 using ModularPipelines.Models;
@@ -61,6 +63,112 @@ protected internal override Task<int> ExecuteAsync(
         }
     }
 
+    private sealed class TimeoutExceptionModule : Module<int>
+    {
+        protected internal override Task<int> ExecuteAsync(
+            IModuleContext context,
+            CancellationToken cancellationToken)
+        {
+            return Task.FromException<int>(new ModuleTimeoutException(
+                GetType(),
+                TimeSpan.FromSeconds(1)));
+        }
+    }
+
+    private sealed class ElapsedCancellationModule : Module<int>
+    {
+        protected override ModuleConfiguration Configure() => ModuleConfiguration.Create()
+            .WithTimeout(TimeSpan.FromMilliseconds(5))
+            .Build();
+
+        protected internal override Task<int> ExecuteAsync(
+            IModuleContext context,
+            CancellationToken cancellationToken)
+        {
+            return Task.FromException<int>(new OperationCanceledException());
+        }
+    }
+
+    private sealed class AlwaysRunTimeoutExceptionModule : Module<int>
+    {
+        protected override ModuleConfiguration Configure() => ModuleConfiguration.Create()
+            .WithAlwaysRun()
+            .Build();
+
+        protected internal override Task<int> ExecuteAsync(
+            IModuleContext context,
+            CancellationToken cancellationToken)
+        {
+            return Task.FromException<int>(new ModuleTimeoutException(
+                GetType(),
+                TimeSpan.FromSeconds(1)));
+        }
+    }
+
+    private sealed class AlwaysRunElapsedCancellationModule : Module<int>
+    {
+        protected override ModuleConfiguration Configure() => ModuleConfiguration.Create()
+            .WithAlwaysRun()
+            .WithTimeout(TimeSpan.FromMilliseconds(5))
+            .Build();
+
+        protected internal override Task<int> ExecuteAsync(
+            IModuleContext context,
+            CancellationToken cancellationToken)
+        {
+            return Task.FromException<int>(new OperationCanceledException());
+        }
+    }
+
+    [Test]
+    public async Task ExecuteAsync_ClassifiesLateTimeoutAsPipelineTerminated()
+    {
+        var result = await ExecuteAfterPipelineCancellation(new TimeoutExceptionModule());
+
+        await Assert.That(result.ModuleStatus).IsEqualTo(Status.PipelineTerminated);
+    }
+
+    [Test]
+    public async Task ExecuteAsync_ClassifiesElapsedCancellationAsPipelineTerminated()
+    {
+        var module = new ElapsedCancellationModule();
+        var executionContext = new ModuleExecutionContext<int>(module, module.GetType());
+        executionContext.Stopwatch.Start();
+        await Task.Delay(TimeSpan.FromMilliseconds(25));
+        executionContext.Stopwatch.Stop();
+
+        var result = await ExecuteAfterPipelineCancellation(module, executionContext);
+
+        await Assert.That(result.ModuleStatus).IsEqualTo(Status.PipelineTerminated);
+    }
+
+    [Test]
+    public async Task ExecuteAsync_ClassifiesAlwaysRunTimeoutIndependentlyOfPipelineCancellation()
+    {
+        var module = new AlwaysRunTimeoutExceptionModule();
+        var executionContext = new ModuleExecutionContext<int>(module, module.GetType());
+
+        await Assert.That(async () => await ExecuteAfterPipelineCancellation(module, executionContext))
+            .Throws<ModuleFailedException>();
+
+        await Assert.That(executionContext.Status).IsEqualTo(Status.TimedOut);
+    }
+
+    [Test]
+    public async Task ExecuteAsync_ClassifiesAlwaysRunElapsedCancellationAsTimeout()
+    {
+        var module = new AlwaysRunElapsedCancellationModule();
+        var executionContext = new ModuleExecutionContext<int>(module, module.GetType());
+        executionContext.Stopwatch.Start();
+        await Task.Delay(TimeSpan.FromMilliseconds(25));
+        executionContext.Stopwatch.Stop();
+
+        await Assert.That(async () => await ExecuteAfterPipelineCancellation(module, executionContext))
+            .Throws<ModuleFailedException>();
+
+        await Assert.That(executionContext.Status).IsEqualTo(Status.TimedOut);
+    }
+
     [Test]
     public async Task ExecuteAsync_DisposesOriginalAndLinkedCancellationTokenSources()
     {
@@ -295,4 +403,63 @@ await Assert.That(cacheRepository.WriteCancellationToken)
                 .IsEqualTo(cacheRepository.ReadCancellationToken);
         }
     }
+
+    private static async Task<ModuleResult<int>> ExecuteAfterPipelineCancellation(
+        Module<int> module,
+        ModuleExecutionContext<int>? executionContext = null)
+    {
+        executionContext ??= new ModuleExecutionContext<int>(module, module.GetType());
+
+        var logger = new Mock<IInternalModuleLogger>();
+        var services = new Mock<IServicesContext>();
+        services.SetupGet(x => x.Options).Returns(new PipelineOptions());
+        var moduleContext = new Mock<IModuleContext>();
+        moduleContext.SetupGet(x => x.Logger).Returns(logger.Object);
+        moduleContext.SetupGet(x => x.Services).Returns(services.Object);
+
+        var resultRepository = new Mock<IModuleResultRepository>();
+        resultRepository.SetupGet(x => x.IsEnabled).Returns(false);
+        var directHookInvoker = new Mock<IDirectHookInvoker>();
+        directHookInvoker
+            .Setup(x => x.InvokeBeforeExecuteAsync(
+                module,
+                moduleContext.Object,
+                It.IsAny<CancellationToken>()))
+            .Returns(Task.CompletedTask);
+        directHookInvoker
+            .Setup(x => x.InvokeFailedAsync(
+                module,
+                moduleContext.Object,
+                It.IsAny<Exception>(),
+                It.IsAny<CancellationToken>()))
+            .Returns(Task.CompletedTask);
+        directHookInvoker
+            .Setup(x => x.InvokeAfterExecuteAsync(
+                module,
+                moduleContext.Object,
+                It.IsAny<ModuleResult<int>>(),
+                It.IsAny<CancellationToken>()))
+            .ReturnsAsync((ModuleResult<int>?) null);
+
+        using var engineCancellationToken =
+            new PipelineEngineCancellationToken(new PrimaryExceptionContainer());
+        engineCancellationToken.CancelWithException(new InvalidOperationException("Prior module failure"));
+
+        var moduleConditionHandler = new Mock<IModuleConditionHandler>();
+        moduleConditionHandler
+            .Setup(x => x.ShouldIgnore(module, It.IsAny<CancellationToken>()))
+            .ReturnsAsync((false, null));
+        var pipeline = new ModuleExecutionPipeline(
+            resultRepository.Object,
+            engineCancellationToken,
+            directHookInvoker.Object,
+            moduleConditionHandler.Object,
+            OptionsFactory.Create(new PipelineOptions()));
+
+        return await pipeline.ExecuteAsync(
+            module,
+            executionContext,
+            moduleContext.Object,
+            CancellationToken.None);
+    }
 }