diff --git a/internal/cmd/rig_integration_test.go b/internal/cmd/rig_integration_test.go
index 4924709a..fe10dd70 100644
--- a/internal/cmd/rig_integration_test.go
+++ b/internal/cmd/rig_integration_test.go
@@ -254,6 +254,40 @@ func TestRigAddCreatesCorrectStructure(t *testing.T) {
 	} else if info.IsDir() {
 		t.Errorf("refinery/rig/.git should be a file (worktree), not a directory")
 	}
+
+	// Verify Claude settings are created in correct locations (outside git repos).
+	// Settings in parent directories are inherited by agents via directory traversal,
+	// without polluting the source repos.
+	expectedSettings := []struct {
+		path string
+		desc string
+	}{
+		{filepath.Join(rigPath, "witness", ".claude", "settings.json"), "witness/.claude/settings.json"},
+		{filepath.Join(rigPath, "refinery", ".claude", "settings.json"), "refinery/.claude/settings.json"},
+		{filepath.Join(rigPath, "crew", ".claude", "settings.json"), "crew/.claude/settings.json"},
+		{filepath.Join(rigPath, "polecats", ".claude", "settings.json"), "polecats/.claude/settings.json"},
+	}
+
+	for _, s := range expectedSettings {
+		if _, err := os.Stat(s.path); err != nil {
+			t.Errorf("%s not found: %v", s.desc, err)
+		}
+	}
+
+	// Verify settings are NOT created inside source repos (these would be wrong)
+	wrongLocations := []struct {
+		path string
+		desc string
+	}{
+		{filepath.Join(rigPath, "witness", "rig", ".claude", "settings.json"), "witness/rig/.claude (inside source repo)"},
+		{filepath.Join(rigPath, "refinery", "rig", ".claude", "settings.json"), "refinery/rig/.claude (inside source repo)"},
+	}
+
+	for _, w := range wrongLocations {
+		if _, err := os.Stat(w.path); err == nil {
+			t.Errorf("%s should NOT exist (settings would pollute source repo)", w.desc)
+		}
+	}
 }
 
 // TestRigAddInitializesBeads verifies that beads is initialized with