diff --git a/pkg/storage/storage.go b/pkg/storage/storage.go
index 4ac5dbf4f..e7244001c 100644
--- a/pkg/storage/storage.go
+++ b/pkg/storage/storage.go
@@ -18,7 +18,6 @@ package storage // import "k8s.io/helm/pkg/storage"
 
 import (
 	"fmt"
-	"strings"
 
 	rspb "k8s.io/helm/pkg/proto/hapi/release"
 	relutil "k8s.io/helm/pkg/releaseutil"
@@ -128,13 +127,30 @@ func (s *Storage) Deployed(name string) (*rspb.Release, error) {
 		"OWNER":  "TILLER",
 		"STATUS": "DEPLOYED",
 	})
-	if err == nil {
-		return ls[0], nil
-	}
-	if strings.Contains(err.Error(), "not found") {
+	if err != nil || len(ls) == 0 {
 		return nil, fmt.Errorf("%q has no deployed releases", name)
 	}
-	return nil, err
+
+	return ls[0], nil
+}
+
+// Failed returns the failed release with the provided release name, or
+// returns ErrReleaseNotFound if not found.
+func (s *Storage) Failed(name string) (*rspb.Release, error) {
+	s.Log("getting failed release from %q history", name)
+
+	ls, err := s.Driver.Query(map[string]string{
+		"NAME":   name,
+		"OWNER":  "TILLER",
+		"STATUS": "FAILED",
+	})
+
+	if err != nil || len(ls) == 0 {
+		return nil, fmt.Errorf("%q has no failed releases", name)
+	}
+
+	return ls[0], nil
+
 }
 
 // History returns the revision history for the release with the provided name, or
diff --git a/pkg/storage/storage_test.go b/pkg/storage/storage_test.go
index fb2824de7..c9ae2622e 100644
--- a/pkg/storage/storage_test.go
+++ b/pkg/storage/storage_test.go
@@ -325,6 +325,31 @@ func TestStorageLast(t *testing.T) {
 	}
 }
 
+func TestStorageFailed(t *testing.T) {
+	storage := Init(driver.NewMemory())
+
+	const name = "angry-bird"
+
+	// Set up storage with test releases.
+	setup := func() {
+		// release records
+		rls0 := ReleaseTestData{Name: name, Version: 1, Status: rspb.Status_FAILED}.ToRelease()
+
+		// create the release records in the storage
+		assertErrNil(t.Fatal, storage.Create(rls0), "Storing release 'angry-bird' (v1)")
+	}
+	setup()
+
+	h, err := storage.Failed(name)
+	if err != nil {
+		t.Fatalf("Failed to query for failed release (%v): %v\n", name, err)
+	}
+	if h.Info.Status.Code != rspb.Status_FAILED {
+		t.Errorf("Expected a failed status, got %s", h.Info.Status.Code)
+	}
+
+}
+
 type ReleaseTestData struct {
 	Name      string
 	Version   int32
diff --git a/pkg/tiller/release_server_test.go b/pkg/tiller/release_server_test.go
index ce95acc8f..ba628860a 100644
--- a/pkg/tiller/release_server_test.go
+++ b/pkg/tiller/release_server_test.go
@@ -309,6 +309,20 @@ func newHookFailingKubeClient() *hookFailingKubeClient {
 	}
 }
 
+func newInstallFailingKubClient() *installFailingKubeClient {
+	return &installFailingKubeClient{
+		PrintingKubeClient: environment.PrintingKubeClient{Out: os.Stdout},
+	}
+}
+
+type installFailingKubeClient struct {
+	environment.PrintingKubeClient
+}
+
+func (h *installFailingKubeClient) Create(namespace string, reader io.Reader, timeout int64, shouldWait bool) error {
+	return errors.New("Failed create")
+}
+
 type hookFailingKubeClient struct {
 	environment.PrintingKubeClient
 }
diff --git a/pkg/tiller/release_update.go b/pkg/tiller/release_update.go
index d251db753..e46d71e7d 100644
--- a/pkg/tiller/release_update.go
+++ b/pkg/tiller/release_update.go
@@ -72,9 +72,12 @@ func (s *ReleaseServer) prepareUpdate(req *services.UpdateReleaseRequest) (*rele
 	// finds the deployed release with the given name
 	currentRelease, err := s.env.Releases.Deployed(req.Name)
 	if err != nil {
-		return nil, nil, err
+		// try to find a failed release we can upgrade
+		currentRelease, err = s.env.Releases.Failed(req.Name)
+		if err != nil {
+			return nil, nil, err
+		}
 	}
-
 	// If new values were not supplied in the upgrade, re-use the existing values.
 	if err := s.reuseValues(req, currentRelease); err != nil {
 		return nil, nil, err
diff --git a/pkg/tiller/release_update_test.go b/pkg/tiller/release_update_test.go
index 0f2bcbabd..fdd5bd50a 100644
--- a/pkg/tiller/release_update_test.go
+++ b/pkg/tiller/release_update_test.go
@@ -239,6 +239,49 @@ func TestUpdateReleaseFailure(t *testing.T) {
 	}
 }
 
+func TestUpdateInstalledFailure(t *testing.T) {
+	c := helm.NewContext()
+	rs := rsFixture()
+	rel := releaseStub()
+
+	rs.env.KubeClient = newInstallFailingKubClient()
+	rs.Log = t.Logf
+
+	_, err := rs.InstallRelease(c, &services.InstallReleaseRequest{
+		Name:         rel.Name,
+		DisableHooks: true,
+		Chart: &chart.Chart{
+			Metadata: &chart.Metadata{Name: "hello"},
+			Templates: []*chart.Template{
+				{Name: "templates/something", Data: []byte("hello: world")},
+			},
+		},
+	})
+	if err == nil {
+		t.Error("Expected failed install")
+	}
+	// check that the first release failed
+	_, err = rs.env.Releases.Failed(rel.Name)
+	if err != nil {
+		t.Fatalf("Failed to get failed: %s", err)
+	}
+
+	okReq := &services.UpdateReleaseRequest{
+		Name: rel.Name,
+		Chart: &chart.Chart{
+			Metadata: &chart.Metadata{Name: "hello"},
+			Templates: []*chart.Template{
+				{Name: "templates/hello", Data: []byte("hello: world")},
+			},
+		},
+	}
+	// try to update a release where the previous version was a failure
+	_, err = rs.UpdateRelease(c, okReq)
+	if err != nil {
+		t.Fatalf("Failed updated: %s", err)
+	}
+}
+
 func TestUpdateReleaseNoHooks(t *testing.T) {
 	c := helm.NewContext()
 	rs := rsFixture()