Tenant Fire & Insurance - How does payment get handled?

[Matt Said]

My tenant somehow started a kitchen fire that was pretty isolated but smoke damage spread through-out most of the unit.  No structural damage other than fire dept ripped down some cabinets and punched through the drywall in a few places.  

Insurance company is saying roughly $28k in damages and has a preferred vendor which would do the work & direct bill.  Has anyone gone through this before?  I'm trying to stay within what is legal but if I hire my own contractors, get a check from the ins company and don't pay out the full $28k, can I pocket the rest?   Or does it not work that way?   Thanks!