In this paper the existence of unknown input observers for networks of interconnected second-order linear time invariant systems is studied. Two classes of distributed control systems of large practical relevance are considered. It is proved that for these systems one can construct a bank of unknown input observers, and use them to detect and isolate faults in the network. The result presents a distributed implementation. In particular, by exploiting the system structure, this work provides further insight into the design of UIO for networked systems. Moreover, the importance of certain network measurements is shown. Infeasibility results with respect to available measurements and faults are also provided, as well as methods to remove faulty agents from the network. Applications to power networks and robotic formations are presented. It is shown how the developed methodology apply to a power network described by the swing equation with a faulty bus. For a multi-robot system, it is illustrated how a faulty robot can be detected and removed.