diff --git a/nemo_retriever/src/nemo_retriever/text_embed/runtime.py b/nemo_retriever/src/nemo_retriever/text_embed/runtime.py
index de3e3d5e21..62d65c90fa 100644
--- a/nemo_retriever/src/nemo_retriever/text_embed/runtime.py
+++ b/nemo_retriever/src/nemo_retriever/text_embed/runtime.py
@@ -19,6 +19,10 @@
 from nemo_retriever.text_embed.main_text_embed import TextEmbeddingConfig, create_text_embeddings_for_df
 
 
+def _is_local_embed(endpoint: Optional[str], model: Any) -> bool:
+    return endpoint is None and model is not None
+
+
 def _embed_group(
     group_df: pd.DataFrame,
     *,
@@ -184,6 +188,8 @@ def embed_text_main_text_embed(
             logger.debug("torch.cuda.empty_cache() failed during error cleanup: %s", _cache_exc)
         logger.error("Embedding failed: %s: %s", type(exc).__name__, exc, exc_info=True)
         report_error("embed", exc)
+        if _is_local_embed(endpoint, model):
+            raise
         out_df = batch_df.copy()
         out_df[output_column] = [{"embedding": [], "error": str(exc)}] * len(out_df)
         out_df[embedding_dim_column] = 0
diff --git a/nemo_retriever/tests/test_text_embed_runtime.py b/nemo_retriever/tests/test_text_embed_runtime.py
new file mode 100644
index 0000000000..d6075e2f39
--- /dev/null
+++ b/nemo_retriever/tests/test_text_embed_runtime.py
@@ -0,0 +1,61 @@
+# SPDX-FileCopyrightText: Copyright (c) 2026, NVIDIA CORPORATION & AFFILIATES.
+# All rights reserved.
+# SPDX-License-Identifier: Apache-2.0
+
+from __future__ import annotations
+
+import pandas as pd
+import pytest
+
+from nemo_retriever.text_embed import runtime
+
+
+@pytest.fixture(autouse=True)
+def _clear_reported_errors():
+    from nemo_retriever.nim.error_reporter import drain_errors
+
+    drain_errors()
+    yield
+    drain_errors()
+
+
+class _FailingEmbedder:
+    def embed(self, texts, batch_size: int):
+        raise RuntimeError("backend unavailable")
+
+
+class _EmptyEmbedder:
+    def embed(self, texts, batch_size: int):
+        return [[] for _ in texts]
+
+
+def _text_df() -> pd.DataFrame:
+    return pd.DataFrame({"text": ["hello"], "metadata": [{}]})
+
+
+def test_local_embed_failure_raises_instead_of_returning_empty_rows():
+    with pytest.raises(RuntimeError, match="backend unavailable"):
+        runtime.embed_text_main_text_embed(_text_df(), model=_FailingEmbedder())
+
+
+def test_local_empty_embedding_result_is_reported_without_breaking_batch():
+    result = runtime.embed_text_main_text_embed(_text_df(), model=_EmptyEmbedder())
+
+    assert result.iloc[0]["text_embeddings_1b_v2_dim"] == 0
+    assert not bool(result.iloc[0]["text_embeddings_1b_v2_has_embedding"])
+
+
+def test_remote_embed_failure_preserves_error_payload(monkeypatch):
+    def _raise_embed_group(*args, **kwargs):
+        raise RuntimeError("remote unavailable")
+
+    monkeypatch.setattr(runtime, "_embed_group", _raise_embed_group)
+
+    result = runtime.embed_text_main_text_embed(_text_df(), embedding_endpoint="http://embed.example/v1")
+
+    assert result.iloc[0]["text_embeddings_1b_v2"] == {
+        "embedding": [],
+        "error": "remote unavailable",
+    }
+    assert result.iloc[0]["text_embeddings_1b_v2_dim"] == 0
+    assert not bool(result.iloc[0]["text_embeddings_1b_v2_has_embedding"])