To improve the dependability and stability of UPS systems, the type and location of downstream faults need to be monitored and identified. To address this problem, this paper proposes a fast and localized overcurrent protection method. That is, when a single short-circuit fault occurs in the system, a huge current will flow through the circuit breaker of that phase, causing the circuit breaker to break while the other two phases operate normally. Specifically, a detection algorithm was developed that competently identified short-circuit and ground failures. It has been tested and validated in a true UPS system. The proposed algorithm enables to clearly distinguish short-circuit and ground failures from other over-current failures like overloading. In this analysis of real UPS systems, the algorithm designed in this paper was able to detect faults within 100ms of their occurrence and with response times well below 100ms.