Our rental property burned down three days after new tenant moved in. It has been about two months and we have not received a fire report because the investigation is ongoing. Turns out the tenants story had many discrepancies which is causing delay. We were jyst served papers that tenant is suing us for deposit,1st months rent and hotel expenses. We feel we should wait until investigation is complete to start giving money back. Does tenant have a case?

Depends.

Does your state or country have a statute requiring a landlord to give notice of intent to keep a deposit?

The fact that an investigation is pending does not prevent the tenant from filing suit. The out come will depend on whether you or the tenant was negligent so as to cause the fire.

I would counter-claim for the fire damage. But you do have insurance, I hope? If so, notify the insurance company. It has the duty to defend the lawsuit, including hiring an attorney for you.

Depends.

Does your state or country have a statute requiring a landlord to give notice of intent to keep a deposit?

The fact that an investigation is pending does not prevent the tenant from filing suit. The out come will depend on whether you or the tenant was negligent so as to cause the fire.

I would counter-claim for the fire damage. But you do have insurance, I hope? If so, notify the insurance company. It has the duty to defend the lawsuit, including hiring an attorney for you.
We do have insurance. I am not aware of our states statute on the matter, however we don't necessarily intend to keep her deposit. We want to wait for the fire report to come in to make sure that she didn't have anything to do with it before we get it back to her. We feel that that is just common sense. We also feel that it is completely for the list for her to be trying to get us to pay for her hotel expenses as that has nothing to do with us. She did not have renters insurance.

we do have insurance. I am not aware of our states statute on the matter, however we don't necessarily intend to keep her deposit. we want to wait for the fire report to come in to make sure that she didn't have anything to do with it before we get it back to her. we feel that that is just common sense. we also feel that it is completely for the list for her to be trying to get us to pay for her hotel expenses as that has nothing to do with us. she did not have renters insurance.
Oops meant frivolous not for the list.. darn u Siri

There might actually be a law in your state that the landlord has to pay for temporary housing, so be prepared. I am sure I saw that on some state statute or possibly a city ordinance. Localities can add to state law.

You might want to hire a lawyer to deal with both the insurance claim (especially if it is denied or drags out too long) and the lawsuit by the tenant.

we want to wait for the fire report to come in to make sure that she didn't have anything to do with it before we get it back to her. we feel that that is just common sense.

Common sense has little to do with it. The law is what matters. In most areas (ANY question on law needs to include your general locale as laws vary by area. ) the landlord is required to either return the deposit or an accounting of how it was used within a statutorily specified time frame. And in many areas, if the landlord doesn't do so, they can forfeit the right to withhold the deposit and may be liable for damages.

However, since the tenant's lease isn't up (I assume), then the period may not have occurred yet. Another factor would be if you agreed to let them out of the lease, in writing.

I would consult with your attorney or at least your insurance carrier about your obligations with respect to the deposit and what else you are being sued for. You could have some liability here.

As I wrote earlier, you are entitled to an attorney paid by your insurance company. Do you have one? Is this attorney representing you in the lawsuit by the tenants? Have you asked this attorney about all of these issues?