Rental property fire damage Insurance

Yes, you will report the 1099-Misc insurance reimbursement as rental income.  Since insurance is a deductible rental expense each year, any payout if considered income.

Report the amount of your deductible (plus any other amount you paid out of pocket not included in reimbursement), as a repair expense. 

In theory, depending on the extent of the damage, you would reduce your home's Cost Basis by the amount of the damage, then add Assets like new appliances, flooring, etc. to bring it back up to where it was (or more). 

Report a Casualty Loss by typing 'casualty loss' in the Search area, then 'Jump to casualty loss'.

Enter your property's Cost Basis, then enter the amount of insurance reimbursement.

On the next page, the FMV before the event is the total of the Insurance Reimbursement, plus your deductible, plus any out of pocket you paid that was not included in the reimbursement.

The FMV after event is $0.

You are now claiming a loss for the deductible, and any out of pocket, as an Itemized Deduction, if you do itemize.

Here's more info on Rental Property Damage and Casualty Deductions.