If an insurer seeks to void a policy, ab initio, due to misrepresentations in the application, it is incumbent upon the insurer to return all premiums to the insured for that policy term, less it waive the defense or misrepresentation in the application. Massachusetts Bay Insurance Company v. Hall, 186 Ga. App. 19, (1990). An insurer who fails to return the premiums acts inconsistently with his intention that the policy is void because of the application misrepresentation and, as such, waives that defense. State Farm Fire & Casualty Company v. Jenkins, 167 Ga. App. 4 (1983); Loeb v. Nationwide Mutual Fire Insurance Company, 162 Ga. App. 561 (1892).

As indicated above, under O.C.G.A. § 33-24-7, to determine whether a misrepresentation is material or would change the nature, extent or character of the insured interest, the insurer must show that the misrepresentation would either: (1) influence the insurer in determining whether to accept the risk initially; or (2) result in the charge of a higher premium for the risk sought to be insured. Haugseth v. Cotton State Mutual Insurance Company, 192 Ga. App. 853 (1989); Lee v. Metropolitan Life, 158 Ga. 517 (1924). Furthermore, the misrepresentation made by the insured need not be made intentionally in order for the insurer to void coverage. Misrepresentations made innocently, in good faith, and without knowledge that it is false, are sufficient to void the policy so long as same is material to the risk.O.C.G.A. §33-24-7(b)(3); Haugseth v. Cotton State Mutual Insurance Company, Supra; United Family Life Insurance Company v. Shirley, 242 Ga. 235 (1978).

Contracts of insurance are governed generally by the laws which are applicable to contracts in the State of Georgia. Pursuant to Georgia law, once a contract has been breached, absent ratification by the non-breaching party, the breach cannot be undone. In other words, once the contract has been breached, the complying party is free to treat the contract as if it were at an end, and is relieved of any duty to perform under the terms of the contract.Rollins v. Gault, 153 Ga. App. 781, 266 S.E.2d 560 (1980). Insurance in the State of Georgia is a matter of contract, and insurance contracts are treated no differently than any other form of contract.Grange Mutual Casualty Company v. King, 174 Ga. App. 716, 331 S.E.2d 41 (1985); Richmond v. Georgia Farm Bureau Mutual Insurance Company, 140 Ga. App. 215, 231 S.E.2d 245 (1976).

The burden of proof, however, is on an Insurer to prove affirmative defenses such as failure of the insured to comply with policy conditions, misrepresentations made by the insured or fraud. See: O.C.G.A. § 24-4-1; Equitable Life Assur. v. Florence, 47 Ga. App. 711, 171 S.E. 317 (1933); Masonic Relief Ass'n v. Hicks, 47 Ga. App. 499, 171 S.E. 215 (1933); Pennsylvania Threshermen & Farmers Mutual Cas. Ins. Co. v. Taylor, 81 Ga. App. 277, 58 S.E.2d 542 (1950); Employers Liab. Assur. Corp v. Sheftall, 97 Ga. App. 398, 103 S.E.2d 143 (1958).

It is also important that the agent not have any knowledge about misrepresentations made by the insured in the application. In Gustafson v. Cotton States, 230 Ga. App. 310, 496 S.E.2d 346 (1998), Cotton States was able to prevail on Summary Judgment in a matter where the insured has misrepresented her five (5) prior fire losses as well as the fact that they had a Chow on the premises. The Court of Appeals reversed, stating that there were too many fact questions remaining which had to be resolved by a jury.

The Court of Appeals found in Gustafson that even if an application contains material misrepresentations sufficient to void the policy under O.C.G.A. 33-24-7, if an agent of the insurer has actual knowledge that the statement on the application is false, then the agent’s knowledge is imputed to the insurer and the insurer is thereafter estopped from asserting the misrepresentation in the application as a defense. See: O’Kelley v. Southland Life Ins. Co., 167 Ga. App. 455, 305 S.E.2d 873 (1983);  Jones v. United Ins. Co., 177 Ga. App. 102, 338 S.E.2d 532 (1985); Graphic Arts. Mut. Ins. Co. v. Pritchett, 220 Ga. App. 430, 469 S.E.2d 199 (1996); Millan v. Residence Inn, 226 Ga. App. 826, 487 S.E.2d 431 (1997); Gustafson v. Cotton States, Supra.

When determining whether material misrepresentations were made in the application, the insured is permitted to state what their "subjective" understanding of the question was when they read the policy application. See: Jackson National Life v. Snead, 231 Ga. App. 406 ; 499 S.E. 2d 173 (1998).

Omissions in an insured’s policy application are an affirmative defense under Georgia law. As such, it must be plead and pointed out to the insured. Any failure of the insurer to assert the defense initially will result in a waiver of that defense by the insurer. See: Hamilton v. Mecca, Inc., 930 F. Supp. 1540 (S.D. Ga. 1996).

If Insurance Company intends to void the policy as a result of misrepresentations in the application, it is essential that it do so immediately. Where a company discovers a misrepresentation in the application, but continues to treat the policy as valid and binding, and retains the insureds’ premiums as earned, the misrepresentation defense is waived. See: State Farm Fire & Cas. Co. v. Jenkins, 167 Ga. App. 4, 305 S.E.2d 801 (1983); Loeb v. Nationwide Mut. Fire. Ins. Co., 162 Ga. App. 561, 292 S.E.2d 409 (1982); Haugseth v. Cotton States Mut. Ins. Co., 192 Ga. App. 853, 386 S.E.2d 725 (1989); Jones v. Carter, 227 Ga. App. 401, 489 S.E.2d 141 (1997).

The Georgia Court of Appeals has ruled on three occasions that automobile policies may, in fact, be voided to the date of inception pursuant to O.C.G.A. § 33-24-7.

In Bourne v. Balboa Insurance Company, 147 Ga. App. 55 (1977), the insured owned a motorcycle and completed an application for a policy of insurance with Balboa. Balboa maintained that when he made the application, he was asked no question about his driving record and signed the application in blank. The application had, in fact, inquired of Bourne if he had ever had his license suspended or if he had suffered a moving traffic violation in the past two years. The completed application indicated "no" to both questions. In fact, Bourne's driving reflected, and Bourne admitted, that several months before the issuance of the policy, he was convicted of driving under the influence and that his license had been temporarily suspended. Shortly after the policy was issued, Bourne's motorcycle was stolen and a claim was filed. During its investigation, Balboa discovered the violation mentioned above and refused the claim, maintaining that the policy was void ab initio, based on false and material misrepresentations in the application.

During litigation, Bourne admitted that he was not unable to read the application, or that the agent prevented Bourne from reading the application. The court found that one who signs a written document without reading it, unless prevented from doing so by some fraud or artifice, is chargeable with knowledge of its content. As such, Bourne was chargeable with knowledge that the information contained in the application was incorrect, even though he may not have provided same.

The trial court granted summary judgment to the insurer, holding that the policy was void ab initio due to material misrepresentations in the application. Balboa Insurance Company established that the insurance would not have been issued to anyone who had been convicted of DUI or to anyone who had suffered a license suspension in the past. As such, Balboa was well within its rights to void the policy ab initio and decline to pay the claim based on material misrepresentations in the application. The Court of Appeals affirmed the trial court's result and approved the propriety of voiding the motorcycle policy ab initio due to the material misrepresentations in the application. It should be noted that this particular case was decided in 1977, well after the Georgia Legislature's enactment of Georgia's Motor Vehicle Insurance Cancellation statute found in O.C.G.A. § 33-24-45 in 1968. See Ga. L. 1968,p. 1126, § 1.