A model of the case breach fault for solid rocket boosters (SRBs) that takes into account burning-through hole in propellant, insulator and metal layers of a rocket case is developed. Melting of the metal layer and an ablation of the insulator layer in the presence of hot gas flow through the hole are analyzed in detail. Dynamics of the lateral (side) thrust produced by the growing hole is calculated for typical parameters of the SRB. A problem of inference of the fault parameters from the measurements of the nominal values of stagnation pressure and thrust is formulated and solved in quasi-steady approximation. An application of the recently developed Bayesian framework for diagnostics and prognostics of the case breach fault that can cause loss of flight control is discussed.