Hey, this looks like a known Windows-only bug where having the terminal panel visible can cause Connection failed errors.
When the terminal is open, Cursor tries to collect terminal context for chat, but path resolution fails on Windows because of a URI parsing issue.
Two things to try:
Hide the terminal panel before you send a chat message. Switch to the Output or Ports tab at the bottom, or close the bottom panel. This should unblock you right away.
Update Cursor. You are on v2.5.20 from Feb 19, which is about a month behind. Go to Help > Check for Updates. Several connection fixes have shipped since then, and updating might fix it.
If it still happens after updating, can you:
Open Dev Tools via Help > Toggle Developer Tools > Console tab
Try sending a chat message with the terminal visible
Share any errors from the console here
The team is aware of this issue. Your report helps with prioritization.