diff --git a/Makefile b/Makefile
index f5041c8..531cee6 100644
--- a/Makefile
+++ b/Makefile
@@ -40,7 +40,7 @@ test-data:
 	mkdir -p ${tempDir}
 	git clone -b ${branchName} --depth 1 --single-branch ${githubRepoLink} ${gitDataDir}
 	cp -r ${gitDataDir}/ufc ${testDataDir}
-	rm ${testDataDir}/ufc/bandit-tests/*.dynamic-typing.json
+	rm -f ${testDataDir}/ufc/bandit-tests/*.dynamic-typing.json
 	rm -rf ${tempDir}
 
 .PHONY: test
diff --git a/README.md b/README.md
index 351449e..3bcebc0 100644
--- a/README.md
+++ b/README.md
@@ -9,7 +9,7 @@
 
 ```groovy
 dependencies {
-  implementation 'cloud.eppo:eppo-server-sdk:3.1.0'
+  implementation 'cloud.eppo:eppo-server-sdk:4.0.1'
 }
 ```
 
diff --git a/build.gradle b/build.gradle
index 2042a74..5316f8e 100644
--- a/build.gradle
+++ b/build.gradle
@@ -11,7 +11,7 @@ java {
 }
 
 group = 'cloud.eppo'
-version = '4.0.0-SNAPSHOT'
+version = '4.0.1'
 ext.isReleaseVersion = !version.endsWith("SNAPSHOT")
 
 import org.apache.tools.ant.filters.ReplaceTokens
diff --git a/src/main/java/cloud/eppo/EppoClient.java b/src/main/java/cloud/eppo/EppoClient.java
index f0a3b26..e26cc25 100644
--- a/src/main/java/cloud/eppo/EppoClient.java
+++ b/src/main/java/cloud/eppo/EppoClient.java
@@ -198,6 +198,8 @@ public EppoClient buildAndInit() {
               pollingIntervalMs / DEFAULT_JITTER_INTERVAL_RATIO);
 
       // Kick off the first fetch
+      // Graceful mode is implicit here because `FetchConfigurationsTask` catches and logs errors
+      // without rethrowing.
       fetchConfigurationsTask.run();
 
       return instance;
diff --git a/src/test/java/cloud/eppo/EppoClientTest.java b/src/test/java/cloud/eppo/EppoClientTest.java
index 582f7fa..924bd86 100644
--- a/src/test/java/cloud/eppo/EppoClientTest.java
+++ b/src/test/java/cloud/eppo/EppoClientTest.java
@@ -23,6 +23,7 @@
 import com.github.tomakehurst.wiremock.junit5.WireMockExtension;
 import java.io.File;
 import java.lang.reflect.Field;
+import java.util.concurrent.CompletableFuture;
 import java.util.stream.Stream;
 import org.apache.commons.io.FileUtils;
 import org.junit.jupiter.api.AfterAll;
@@ -238,6 +239,39 @@ public void testPolling() {
     verify(httpClientSpy, times(2)).get(anyString());
   }
 
+  // NOTE: Graceful mode during init is intrinsically true since the call is non-blocking and
+  // exceptions are caught without rethrowing in `FetchConfigurationsTask`
+
+  @Test
+  public void testClientMakesDefaultAssignmentsAfterFailingToInitialize() {
+    // Set up bad HTTP response
+    mockHttpError();
+
+    // Initialize and no exception should be thrown.
+    try {
+      EppoClient eppoClient = initFailingGracefulClient(true);
+      Thread.sleep(25); // Sleep to allow the async config fetch call to happen (and fail)
+      assertEquals("default", eppoClient.getStringAssignment("experiment1", "subject1", "default"));
+    } catch (Exception e) {
+      fail("Unexpected exception: " + e);
+    }
+  }
+
+  public static void mockHttpError() {
+    // Create a mock instance of EppoHttpClient
+    EppoHttpClient mockHttpClient = mock(EppoHttpClient.class);
+
+    // Mock sync get
+    when(mockHttpClient.get(anyString())).thenThrow(new RuntimeException("Intentional Error"));
+
+    // Mock async get
+    CompletableFuture<byte[]> mockAsyncResponse = new CompletableFuture<>();
+    when(mockHttpClient.getAsync(anyString())).thenReturn(mockAsyncResponse);
+    mockAsyncResponse.completeExceptionally(new RuntimeException("Intentional Error"));
+
+    setBaseClientHttpClientOverrideField(mockHttpClient);
+  }
+
   @SuppressWarnings("SameParameterValue")
   private void sleepUninterruptedly(long sleepMs) {
     try {
@@ -261,6 +295,20 @@ private EppoClient initClient(String apiKey) {
         .buildAndInit();
   }
 
+  private EppoClient initFailingGracefulClient(boolean isGracefulMode) {
+    mockAssignmentLogger = mock(AssignmentLogger.class);
+    mockBanditLogger = mock(BanditLogger.class);
+
+    return new EppoClient.Builder()
+        .apiKey(DUMMY_FLAG_API_KEY)
+        .host("blag")
+        .assignmentLogger(mockAssignmentLogger)
+        .banditLogger(mockBanditLogger)
+        .isGracefulMode(isGracefulMode)
+        .forceReinitialize(true) // Useful for tests
+        .buildAndInit();
+  }
+
   private void uninitClient() {
     try {
       Field httpClientOverrideField = EppoClient.class.getDeclaredField("instance");
@@ -281,4 +329,16 @@ private void initBuggyClient() {
       throw new RuntimeException(e);
     }
   }
+
+  public static void setBaseClientHttpClientOverrideField(EppoHttpClient httpClient) {
+    // Uses reflection to set a static override field used for tests (e.g., httpClientOverride)
+    try {
+      Field httpClientOverrideField = BaseEppoClient.class.getDeclaredField("httpClientOverride");
+      httpClientOverrideField.setAccessible(true);
+      httpClientOverrideField.set(null, httpClient);
+      httpClientOverrideField.setAccessible(false);
+    } catch (NoSuchFieldException | IllegalAccessException e) {
+      throw new RuntimeException(e);
+    }
+  }
 }