An owner of a lot in a strata scheme may take out insurance in respect of damage to the lot for an amount equal to the amount secured at the date of the contract of insurance by mortgages of and any covenant charges affecting the lot.
The following provisions apply to the payment of an amount under the contract (subject to the terms of the contract)—
any payment to be made by the insurer in respect of damage must be made to the mortgagees and any covenant chargees whose interests are noted in the contract in order of their respective priorities,
the amount must be the amount stated in the contract, the amount of the loss, or an amount sufficient, at the date of the loss, to discharge mortgages of and any covenant charges affecting the lot, whichever is the least amount,
if the amount paid by the insurer equals the amount necessary to discharge a mortgage of the lot, the insurer is entitled to an assignment of that mortgage,
if the amount paid by the insurer is less than the amount necessary to discharge a mortgage of the lot, the insurer is entitled to a sub-mortgage of that mortgage to secure the amount paid on terms and conditions agreed on as provided by subsection (3) or, failing agreement, on the same terms and conditions as those contained in the mortgage by the owner.
For the purposes of subsection (2) (d), any insurer and mortgagee may at any time, whether before or after a contract of insurance referred to in subsection (1) has been entered into by an owner of a lot, agree on the terms and conditions of the sub-mortgage.
The contract of insurance is not liable to be brought into contribution with any other such contract of insurance except another contract of insurance that is in respect of damage to the same lot and relates to the same debt.