(a) The governing body of any city is hereby authorized to establish, by ordinance, a procedure for the payment of not to exceed 15% of the proceeds of any insurance policy based upon a covered claim payment made for damage or loss to a building or other structure. The ordinance shall apply only to a covered claim payment which is in excess of 75% of the face value of the policy covering a building or other insured structure.

(b) The insurer first shall pay all amounts due the holder of a first real estate mortgage against the building or other structure pursuant to the terms of the policy and endorsements thereto and then shall withhold from the covered claim payment a sum not to exceed the amount authorized pursuant to subsection (a) and shall pay such moneys to the city to deposit into an interest-bearing account, unless the city has issued a certificate pursuant to Kan. Stat. Ann. § 40-3906, and amendments thereto.

(c) The city shall release the insured’s proceeds and any interest which has accrued on such proceeds received under subsection (b) within 45 days after receipt of such moneys, unless the city has instituted legal proceedings under the provisions of Kan. Stat. Ann. § 12-1752, and amendments thereto. If the city has proceeded under the provisions of Kan. Stat. Ann. § 12-1752, and amendments thereto, all moneys in excess of that necessary to comply with the provisions of Kan. Stat. Ann. § 12-1750 et seq., and amendments thereto, for the removal of the building or structure, less salvage value, shall be paid to the insured.