This paper develops a methodology for actuator fault diagnostics and quantitative estimation of fault signals in a class of nonlinear systems. The class of nonlinear systems considered is one in which the nonlinearity is an incremental quadratic type of nonlinearity that includes Lipschitz, positive real and sector nonlinear functions. The methodology provides for both state estimation and fault vector estimation. An LMI procedure can be utilized for explicit computation of the observer gains. The procedure developed can also be specialized to linear time invariant systems. Compared to previous results for LTI systems, the procedure developed herein does not require the LTI system to be minimum phase. The use of the developed methodology is demonstrated through an illustrative example of a real world physical application.