Bug report: Usage-limit handling breaks manual model selection — misleading “Switched to composer-2.5” copy, fallback fails, UI spawns agents

Reported by: Saad

Date observed: 2026-06-02 (local time)

Severity: High (blocks paid/manual model use; causes UI instability; misleading billing/limit messaging)

Executive summary

When API usage limits are hit, Cursor shows:

Error: API usage limit reached: Switched to composer-2.5 after reaching API limit.

That is confusing and often wrong:

1. The user already selected Composer 2.5 manually — nothing was “switched.”
2. Composer 2.5 still does not work (requests end in ~0.5–1.5s with no real agent output).
3. Trying other models causes the UI to jump (many new agent sessions in seconds).
4. Auto (catalogModelId=default) on the same account still works.

This looks like a combination of:

• Incorrect/lazy usage-limit error copy (auto-fallback message shown even when user already on fallback model),
• Broken or also-limited fallback to composer-2.5,
• A failed-submit path that mints a new agent per attempt (empty-state-draft → new composerId) instead of reusing the conversation.

Exact user-visible error

Error: API usage limit reached: Switched to composer-2.5 after reaching API limit.