diff --git a/formula-rxjava3/src/main/java/com/instacart/formula/rxjava3/RxJavaRuntime.kt b/formula-rxjava3/src/main/java/com/instacart/formula/rxjava3/RxJavaRuntime.kt
index 6f99c547..81e835d1 100644
--- a/formula-rxjava3/src/main/java/com/instacart/formula/rxjava3/RxJavaRuntime.kt
+++ b/formula-rxjava3/src/main/java/com/instacart/formula/rxjava3/RxJavaRuntime.kt
@@ -11,10 +11,10 @@ import io.reactivex.rxjava3.disposables.FormulaDisposableHelper
 
 object RxJavaRuntime {
 
-    private var defaultErrorHandler: ((Throwable) -> Unit)? = null
+    private var defaultErrorHandler: RxJavaRuntimeErrorHandler? = null
 
-    fun setDefaultErrorHandler(handler: ((Throwable) -> Unit)?) {
-        defaultErrorHandler = handler
+    fun setDefaultErrorHandler(errorHandler: RxJavaRuntimeErrorHandler?) {
+        this.defaultErrorHandler = errorHandler
     }
 
     fun <Input : Any, Output : Any> start(
@@ -29,12 +29,20 @@ object RxJavaRuntime {
                 type = formula.type(),
                 local = inspector,
             )
+
+            val onError = { error: Throwable ->
+                val handled = defaultErrorHandler?.onError(error) ?: false
+                if (!handled) {
+                    emitter.onError(error)
+                }
+            }
+
             val runtimeFactory = {
                 FormulaRuntime(
                     threadChecker = threadChecker,
                     formula = formula,
                     onOutput = emitter::onNext,
-                    onError = defaultErrorHandler ?: emitter::onError,
+                    onError = onError,
                     inspector = mergedInspector,
                     isValidationEnabled = isValidationEnabled,
                 )
@@ -52,7 +60,7 @@ object RxJavaRuntime {
                     runtime = runtimeFactory()
                 }
                 runtime.onInput(input)
-            }, defaultErrorHandler ?: emitter::onError))
+            }, onError))
 
             val runnable = Runnable {
                 threadChecker.check("Need to unsubscribe on the main thread.")
diff --git a/formula-rxjava3/src/main/java/com/instacart/formula/rxjava3/RxJavaRuntimeErrorHandler.kt b/formula-rxjava3/src/main/java/com/instacart/formula/rxjava3/RxJavaRuntimeErrorHandler.kt
new file mode 100644
index 00000000..aa5fb1ed
--- /dev/null
+++ b/formula-rxjava3/src/main/java/com/instacart/formula/rxjava3/RxJavaRuntimeErrorHandler.kt
@@ -0,0 +1,10 @@
+package com.instacart.formula.rxjava3
+
+interface RxJavaRuntimeErrorHandler {
+    /**
+     * @param error [Throwable] that occurred
+     *
+     * @return true if error was handled, false otherwise
+     */
+    fun onError(error: Throwable): Boolean
+}
diff --git a/formula/src/test/java/com/instacart/formula/RxJavaRuntimeTest.kt b/formula/src/test/java/com/instacart/formula/RxJavaRuntimeTest.kt
deleted file mode 100644
index b98c9e55..00000000
--- a/formula/src/test/java/com/instacart/formula/RxJavaRuntimeTest.kt
+++ /dev/null
@@ -1,46 +0,0 @@
-package com.instacart.formula
-
-import com.google.common.truth.Truth.assertThat
-import com.instacart.formula.internal.ClearPluginsRule
-import com.instacart.formula.internal.Try
-import com.instacart.formula.rxjava3.RxJavaRuntime
-import com.instacart.formula.subjects.DynamicParentFormula
-import com.instacart.formula.subjects.TestKey
-import com.instacart.formula.test.RxJavaTestableRuntime
-import com.instacart.formula.test.TestableRuntime
-import org.junit.Rule
-import org.junit.Test
-import org.junit.rules.RuleChain
-import org.junit.rules.TestName
-
-class RxJavaRuntimeTest {
-
-    val runtime: TestableRuntime = RxJavaTestableRuntime
-
-    @get:Rule
-    val rule = RuleChain
-        .outerRule(TestName())
-        .around(ClearPluginsRule())
-        .around(runtime.rule)
-
-    @Test
-    fun `adding duplicate child logs an exception`() {
-        val logs = mutableListOf<String>()
-        RxJavaRuntime.setDefaultErrorHandler { logs.add(it.message.orEmpty()) }
-
-        val result = Try {
-            val formula = DynamicParentFormula()
-            runtime.test(formula, Unit)
-                .output { addChild(TestKey("1")) }
-                .output { addChild(TestKey("1")) }
-        }
-
-        val error = result.errorOrNull()?.cause
-        assertThat(error).isNull()
-        assertThat(logs).hasSize(1)
-        val log = logs.first()
-        val expectedLog = "There already is a child with same key: FormulaKey(scopeKey=null, type=class com.instacart.formula.subjects.KeyFormula, key=TestKey(id=1)). Override [Formula.key] function."
-        assertThat(log).isEqualTo(expectedLog)
-        RxJavaRuntime.setDefaultErrorHandler(null)
-    }
-}
diff --git a/formula/src/test/java/com/instacart/formula/error/RxJavaRuntimeErrorHandlerTest.kt b/formula/src/test/java/com/instacart/formula/error/RxJavaRuntimeErrorHandlerTest.kt
new file mode 100644
index 00000000..17ef2681
--- /dev/null
+++ b/formula/src/test/java/com/instacart/formula/error/RxJavaRuntimeErrorHandlerTest.kt
@@ -0,0 +1,95 @@
+package com.instacart.formula.error
+
+import com.google.common.truth.Truth.assertThat
+import com.instacart.formula.Action
+import com.instacart.formula.DuplicateKeyException
+import com.instacart.formula.internal.ClearPluginsRule
+import com.instacart.formula.internal.Try
+import com.instacart.formula.rxjava3.RxJavaRuntime
+import com.instacart.formula.rxjava3.RxJavaRuntimeErrorHandler
+import com.instacart.formula.subjects.DynamicParentFormula
+import com.instacart.formula.subjects.OnlyUpdateFormula
+import com.instacart.formula.subjects.TestKey
+import com.instacart.formula.test.RxJavaTestableRuntime
+import com.instacart.formula.test.TestableRuntime
+import org.junit.After
+import org.junit.Before
+import org.junit.Rule
+import org.junit.Test
+import org.junit.rules.RuleChain
+import org.junit.rules.TestName
+import kotlin.IllegalStateException
+
+class RxJavaRuntimeErrorHandlerTest {
+
+    val runtime: TestableRuntime = RxJavaTestableRuntime
+
+    @get:Rule
+    val rule = RuleChain
+        .outerRule(TestName())
+        .around(ClearPluginsRule())
+        .around(runtime.rule)
+
+    private val errorLogs = mutableListOf<String>()
+
+    private val duplicateKeyErrorHandler = object : RxJavaRuntimeErrorHandler {
+        override fun onError(error: Throwable): Boolean {
+            return when (error) {
+                is DuplicateKeyException -> {
+                    errorLogs.add(error.message.orEmpty())
+                    true
+                }
+
+                else -> {
+                    false
+                }
+            }
+        }
+    }
+
+    @Before
+    fun setUp() {
+        RxJavaRuntime.setDefaultErrorHandler(duplicateKeyErrorHandler)
+    }
+
+    @After
+    fun tearDown() {
+        RxJavaRuntime.setDefaultErrorHandler(null)
+    }
+
+    @Test
+    fun `emitting a generic error throws an exception`() {
+        val result = Try {
+            val formula = OnlyUpdateFormula<Unit> {
+                events(Action.onInit()) {
+                    throw IllegalStateException("crashed")
+                }
+            }
+            runtime.test(formula, Unit)
+        }
+
+        val error = result.errorOrNull()?.cause
+        assertThat(error).isInstanceOf(IllegalStateException::class.java)
+        assertThat(error?.message).isEqualTo("crashed")
+
+        assertThat(errorLogs).isEmpty()
+    }
+
+    @Test
+    fun `adding duplicate child logs an exception`() {
+        val result = Try {
+            val formula = DynamicParentFormula()
+            runtime.test(formula, Unit)
+                .output { addChild(TestKey("1")) }
+                .output { addChild(TestKey("1")) }
+        }
+
+        val error = result.errorOrNull()?.cause
+        assertThat(error).isNull()
+        assertThat(errorLogs).hasSize(1)
+
+        val log = errorLogs.first()
+        val expectedLog = "There already is a child with same key: FormulaKey(scopeKey=null, type=class com.instacart.formula.subjects.KeyFormula, key=TestKey(id=1)). Override [Formula.key] function."
+        assertThat(log).isEqualTo(expectedLog)
+    }
+}