They do sometimes. 
Apparently yes, just for chuckles was a distance from the vent. And did you check for a dryer vent by chance
About 12"
I measured but did not take a photo.
Dryer vent was fine and 50 ft. away around the corner.
Is that vinyl?
Problem is if they replace it with same (vinyl) it will probably melt again, unless they keep the flame down.
I think replacing it with Aluminum is the only way to go.
My thoughts as well.
Huge problem in Edmonton, houses too close together, one catches on fire, and so do all the neighbours. Fire chief wants vinyl siding banned. (Wouldn’t break my heart either :-))
Minimum is minimum.
Vertical clearance to ventilated soffi t located above the termination
within a horizontal distance of 2 ft (60 cm) from the centerline of the
termination – 18 in. (46 cm) minimum. **
E Vertical clearance to unventilated soffi t - 12 in. (30 cm) minimum.
Stop the updraft into the attic and it may not do that.
It does not vent to the attic.
It"s a bump out only.
Vertical clearance to unventilated soffit - 12 in. (30 cm) minimum. ******
**** Clearance required to vinyl soffit material – 30 in**
This pic may clear up some of the confusion.
Just a thought…
nothing wrong with that 
Nice piece of curved sheet metal sconce ] will do it.
Replacing the vinyl soffit panel with Aluminum will suffice more easily than some “engineered” solution.
Perhaps though everyone has a square of sheet metal laying around doing nothing right ? 
I suppose not everyone like the junkyard look though.
Send me your drawings and specs and I’ll make to pass it along to my client.
What about the wooden rafter end/tail and/or wood boards that the soffit/fascia is fastened to? Seems as if it generated enough heat and melted the vinyl, who knows what else it could do. Heck, even the roof sheathing.
Don’t over thin this.
Clearances are stated in the installation manuals for these fire places.