An analysis of the case breach fault in a large segmented SRM is presented in the context of development of the IVHM system. The internal ballistic of the SRM is simulated using a 1D model that takes into account grain geometry, propellant regression rate including erosive burning and surface friction, nozzle ablation, and case breach fault dynamics. The model is integrated in quasi-steady approximation by solving a boundary value problem for the spatial distribution of the flow variables in the combustion chamber at each time step of steady burning. The model can simulate very accurately nominal and off-nominal regime of internal ballistic of segmented SRM and can be applied to an analysis various fault modes of large SRM. The model calculations are verified by comparison with the results of simulations of axi-symmetric high-fidelity model (developed by the third party). The model is used to simulate case breach fault at a given location along the motor axis. The fault diagnostic and prognostic (FD&P) system is developed in two steps. First, the diagnostics of the case breach fault is performed using stationary solution for the nozzle stagnation pressure, which is known to hold surprisingly well in large SRMs. The later approximation is further improved by introducing an effective design curve that relates the total burning area to the propellant burn distance. The prognostics of the case breach fault dynamics and internal ballistics of SRM in off-nominal regime is achieved using scaling equations developed earlier for malfunction study of RSRM ballistic failure. The results of these predictions are compared with the results of integration forward in time 1D model of internal ballistics of SRM in off-nominal regime for the given parameters of the case breach fault.