But we don’t know yet which side has the fault. We’re not looking at Figure 2 yet.
Also, don’t get confused about the “N”. We just use a neutral point as reference for some of the measurements. There is no neutral line in an L1-L2 circuit.
At those two measurements in Figure 1 that show 120vac wrt N, are we actually getting 120v from two different hot lines, or is it the same 120v from just one of the lines?