Here is my thing. This is all over peanuts. Would it really be such a big thing to eliminate them from your daycare meal plan? I appreciate that it's hard to be 100% peanut free as processed products can easily be cross contaminated but to just cut out the occasional PB that you serve is not going to be detrimental to the other kids and as a result reduces your liability ten fold. You could explain that you can't guarantee peanut free but can reduce the exposure by not serving things that are clearly made with or from peanuts. While you clearly are knowledgable on allergies with your personal experiences, who knows how this allergy will evolve in the child and the next allergic reaction could be the one that has them on the floor blue unable to breath. It's not like you have to eliminate a main food group which will take something away from the other children such as dairy, or gluten. It's just peanuts. Regardless of them signing up knowing you are not peanut free, circumstances have changed and the fact that you know about the allergy, and that it has been confirmed by an allergist but you still continue to serve peanuts, when exposure could be so dramatically reduced, won't prevent them from taking action should the worst happen. Your daycare, your rules. If you don't know how this is going to turn out, IMO it's because YOU haven't made the choice of how it is going to turn out. Either stop serving the peanuts in the best interest of the child and put something in writing to the parents to explain to them that you are not 100% peanut free but don't knowingly serve peanuts, or alternatively if it means so much to you to keep that food in your meal plan, terminate them. Remember it's about the child in care regardless of a parents attitude. Either make it work or cut all ties. I have been faced with this exact problem with a child in care who was also confirmed allergic to tree nuts, sesame and peanuts and due to the liability on me, I gave them the same outline of what I could do and if this wasn't satisfactory to them then they would have to find alternative care. I just kept my focus on what was best for the child, and how I would feel in their shoes.