Nov. 5 (Bloomberg) -- American Express Co. customers were charged hundreds of millions of dollars for travel insurance that was never provided, lawyers for cardholders told a California judge.

The largest U.S. credit card company by purchases is accused in a lawsuit of overbilling for travel insurance premiums and failing to refund insurance fees when customers canceled flights, said attorney Max Folkenflik, who represents cardholders in the lawsuit.

In opening arguments yesterday at a nonjury trial in Fremont, California, Folkenflik asked Alameda County Superior Court Judge George 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 agreement provides that you paid for something and you get it,'' Folkenflik said. ``The agreement is not a provision of sharing wealth with American Express and allowing it to keep money that doesn't belong to it.''

American Express spokeswoman Joanna Lambert said in a statement that the company has ``a robust system in place to allow a refund to be easily obtained by any cardmember who is charged a premium and then subsequently does not receive the benefit of the insurance.'' Company attorneys will give opening statements later in the trial.

6 Million Cardholders

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

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.

The first phase of the trial, expected by lawyers to last two weeks, is about American Express's contractual obligations to a nationwide group of cardholders. The next phase deals with unfair business practices claims on behalf of California and New York cardholders.

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

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.

Last Updated: November 5, 2008 00:01 EST