American Express Wins Trial on Insurance Overcharge Claims

By Bob Van Voris and Karen Gullo

March 27 (Bloomberg) -- American Express Co., the largest credit-card company by purchases, won a trial in California in a case claiming customers were charged hundreds of millions of dollars for travel insurance that was never provided.

California Superior Court Judge George Hernandez in Fremont ruled in favor of American Express yesterday after hearing evidence from a class of cardholders in the second phase of a non-jury trial that began Jan. 12. Hernandez found that the cardholders failed to prove their case, ending the trial before American Express was to begin presenting evidence.

Suing cardholders claimed New York-based American Express overbilled for travel insurance premiums and failed to refund the fees when customers canceled flights, in violation of California and New York unfair business practices laws.

The cardholders had asked Hernandez to rule that American Express failed to clearly show how customers could reclaim insurance premiums and shouldn’t be allowed to keep the fees.

The lawsuit was filed in 2001 on behalf of 6 million current and former American Express cardholders who purchased fee-based travel-related insurance plans from September 1995 to February 2008.

American Express charged for insurance on all airline- related transactions above $45, such as itinerary changes, baggage fees and seat upgrades, when it should have charged the fees only for airfare purchases, according to the complaint.

In the first phase of the trial, which began Nov. 3, Hernandez ruled on disputed contracts and the meaning of contract terms in the case.

The case is Hoffman v. American Express Travel Related Services, 022881, Alameda County Superior Court (Fremont, California).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net; Karen Gullo in San Francisco at kgullo@bloomberg.net.