This appeal raises two issues: the first involves the scope and validity of federal regulations limiting the disclosure of hospital records relating to treatment for alcoholism and the second involves the application of Massachusetts statutes providing a civil cause of action to persons injured as a result of unfair practices in claim settlements by insurance companies. We conclude that the district court properly applied the federal regulations and limited the scope of disclosure of certain hospital records. We also conclude that the district court properly ruled in favor of one plaintiff on his unfair claim settlement claim and against the other plaintiff on her claim. We therefore affirm.

The plaintiffs, Ursula C. Whyte, the widow, and Charles A. Bergeron, a business associate, are the named beneficiaries of two life insurance policies issued by the defendant, Connecticut Mutual Life Insurance Company ("Connecticut Mutual"), on the life of S. William Whyte. Each of the two policies contained a clause excluding coverage if Mr. Whyte should die as a result of suicide. Mr. Whyte died on March 2, 1981, at his home in Wilbraham, Massachusetts. He was found sitting in his automobile, which was parked inside a closed garage, with the engine running. After efforts to revive Mr. Whyte were unsuccessful he was pronounced dead. Following a brief investigation, the medical examiner concluded that Mr. Whyte had committed suicide by asphyxiating himself.

Mr. Bergeron and Mrs. Whyte filed claims with Connecticut Mutual asserting that Mr. Whyte had not committed suicide but had died as a result of an accident. Connecticut Mutual invoked the suicide exclusion clauses and refused to pay the claims. Mrs. Whyte and Mr. Bergeron separately sued in the Federal District Court for the District of Massachusetts on the insurance contract and under state consumer protection statutes. The cases were consolidated and went to trial in September of 1985. The issue in the contract claims, whether Mr. Whyte died accidentally or as a result of suicide, was presented to a jury. The consumer protection claims were presented to the trial judge.

Connecticut Mutual argued to the jury that Mr. Whyte was a troubled man. He had a history of alcohol problems and had been diagnosed as suffering from manic depression. He was engaged in the business of selling residential property and developing commercial property, and some of his business deals had resulted in major financial setbacks. He was separated from his wife who, despite his hopes for a reconciliation, intended to divorce him. Connecticut Mutual also noted the circumstances of Mr. Whyte's death and argued that they pointed conclusively toward suicide. Mr. Whyte was found in his car with the engine running inside a closed garage. Although the temperature outside was around 40 degrees and although Mr. Whyte had an important meeting scheduled for that afternoon, he was found wearing casual kakhi trousers, a short sleeve sport shirt, and no socks. When the police checked the automatic garage door opener on top of the console in the car, they found that it was in perfect working order.

The plaintiffs presented a different picture of Mr. Whyte to the jury. Although they admitted that Mr. Whyte had had some problems, they contended that he had overcome many of them. Mr. Whyte had recently received alcoholism treatment and had given up drinking. After receiving treatment he joined Alcoholics Anonymous and was proud of having overcome his drinking problem. Moreover, a business deal that Mr. Whyte had been working on was finally about to come to fruition; he was excited about its prospects. In addition, Mr. Whyte had hopes of a reconciliation with his wife. Witnesses testified that Mr. Whyte was a happy, forward thinking man making plans for the future. Indeed, on the afternoon of his death, Mr. Whyte was scheduled to meet with the lieutenant governor of Massachusetts.

The plaintiffs also argued that the circumstances pointed to the conclusion that Mr. Whyte's death was accidental. They presented experts who testified that most carbon monoxide poisonings are accidental. Carbon monoxide poisoning affects the body in such a way that the capacities to perceive danger and to perform even simple tasks such as turning off a car or operating a garage door opener are quickly and severely diminished, often in less than two minutes. Moreover, Mr. Whyte had a history of being forgetful and was not mechanically adept. The plaintiffs hypothesized that Mr. Whyte had stopped to look at the newspaper found in the front seat of his car and never realized what happened. Although Mr. Whyte was a constant notewriter, no suicide note was found.

The jury found for the plaintiffs concluding that Mr. Whyte had not committed suicide but had died accidentally. While the jury was deliberating, the judge considered the plaintiffs' claims that they were entitled to recover damages, attorney's fees, and costs under Mass. Gen. Laws chs. 93A & 176D. These are consumer protection statutes that prohibit unfair practices by insurance companies. The judge found that Connecticut Mutual had committed an unfair practice in its handling of Mr. Bergeron's claim but not in its handling of Mrs. Whyte's claim.

Connecticut Mutual now takes this appeal from the jury verdict on the contract claims and from the court's decision on Mr. Bergeron's unfair practice claim. Mrs. Whyte appeals from the court's decision on her unfair practice claim.

Connecticut Mutual contends that it should be granted a new trial on the contract claims because the district court erroneously refused to release to Connecticut Mutual the complete Beech Hill Hospital records of Mr. Whyte on the grounds that federal law prohibited disclosure. Approximately four months before his death, Mr. Whyte was admitted to Beech Hill Hospital in Dublin, New Hampshire for alcoholism treatment. He remained at Beech Hill for 19 days. During discovery, Connecticut Mutual sought to obtain the complete records relating to Mr. Whyte's treatment. Mrs. Whyte, who was in possession of a copy of the records, asserted that the records were confidential under 42 U.S.C. Sec. 290dd-3 (Supp.1985) and the regulations promulgated under that statute,1 and therefore were not subject to discovery.

Section 290dd-3(a) prohibits disclosure of records relating to alcoholism treatment "which is conducted, regulated, or directly or indirectly assisted by any department or agency of the United States".2 Section 290dd-3(b)(2)(C)3 provides, however, that disclosure may be authorized by court order upon a showing of good cause by the party seeking disclosure. After a hearing, the magistrate to whom the matter was referred ruled that Connecticut Mutual had established good cause. The magistrate concluded, however, that the regulations promulgated under Sec. 290dd by the Secretary of Health and Human Services, particularly 42 C.F.R. Sec. 2.63(a),4 limited disclosure to "objective data" only and that Mr. Whyte's statements made during treatment could not be released. The magistrate therefore authorized the release to Connecticut Mutual of "sanitized copies" of the Beech Hill records containing only objective information.

Connecticut Mutual objected to this ruling arguing that Mr. Whyte's statements during treatment were crucial evidence concerning the key issue of his state of mind at the time of his death. Connecticut Mutual argued to the district court that the magistrate had erred for two reasons: first, Sec. 290dd-3 does not apply in this situation because Beech Hill Hospital is not directly or indirectly assisted by the federal government and second, the nonobjective information is discoverable under Fed.R.Civ.P. 34. The district court rejected both arguments and upheld the magistrate's order limiting disclosure to the objective data contained in the records.

On appeal, Connecticut Mutual does not argue that Sec. 290dd-3 is not applicable or that Fed.R.Civ.P. 34 allows discovery. Rather, Connecticut Mutual argues, apparently for the first time, that 42 C.F.R. Sec. 2.63 is invalid because it is at odds with the statute under which it was promulgated, specifically Sec. 290dd-3(b)(2)(C). This court has repeatedly held that "we will not consider a legal theory not presented to the trial court, however meritorious it may be".5 Although this rule is not absolute, "it is relaxed only in 'horrendous cases when a gross miscarriage of justice would occur' ".6 "In addition, the new ground must be 'so compelling as virtually to insure appellant's success'."7

After reviewing the record, we find that upholding the regulation and limiting disclosure to objective data will not result in a "gross miscarriage of justice", nor is Connecticut Mutual's new position so compelling as virtually to insure its success.

The federal statute, 42 U.S.C. Sec. 290dd-3, expressly authorizes the Secretary of Health and Human Services to develop "procedures and criteria for the issuance and scope of orders under subsection (b)(2)(C) of this section, as in the judgment of the Secretary are necessary or proper to effectuate the purposes of this section".8 As the Supreme Court held in Mourning v. Family Publications Service, Inc.,9:

Where the empowering provision of a statute states simply that the agency may "make ... such rules and regulations as may be necessary to carry out the provisions of this Act," ... the validity of a regulation promulgated thereunder will be sustained so long as it is "reasonably related to the purposes of the enabling legislation."10

The purpose of Sec. 290dd-3 is clear. Congress recognized that absolute confidentiality is an indispensable prerequisite to successful alcoholism research.11 Moreover, confidentiality is necessary to ensure successful alcoholism treatment. Without guarantees of confidentiality, many individuals with alcohol problems would be reluctant to participate fully in alcoholism programs.12 The regulations, especially Sec. 2.63, were specifically drafted with these considerations in mind. Section 2.63 is rationally related to and furthers the congressional purpose of protecting patient confidentiality.13 That it is more limiting than Sec. 290dd-3(b)(2)(C) is not surprising, given that Congress specifically delegated to the Secretary authority to determine the scope of any court order authorizing disclosure of hospital records covered by the statute. The regulation at issue was promulgated in 1975,14 and Congress amended 42 U.S.C. Sec. 290dd-3 in 1976.15 Thus, Congress had the opportunity to require a revision of 42 C.F.R. Sec. 2.63, but declined to do so.

Connecticut Mutual argues--also apparently for the first time on appeal--that Sec. 2.63 should not be read literally to prevent disclosure in a case such as the instant one where the patient's state of mind is the crucial issue. Related to this is Connecticut Mutual's policy argument that by bringing suit and putting the patient's state of mind at his death in issue, Mrs. Whyte, Mr. Whyte's widow, has waived the protection accorded under Sec. 2.63.

We understand Connecticut Mutual's difficult position, but we are bound by the express and unequivocal language of the regulations. The regulations are clear that only objective data may be disclosed,16 and no waiver has occurred in this instance. Section 2.63 makes clear that waiver can occur only "[w]hen a patient in litigation offers testimony or other evidence pertaining to the content of his communications with a program".17 Even if Mrs. Whyte is substituted in the place of her husband, the patient, for purposes of this waiver provision, it is beyond question that she did not put "the content of his communications" with Beech Hill Hospital in question during the trial, and therefore no waiver occurred.18 Notwithstanding Connecticut Mutual's assertion that Mr. Whyte's statements during treatment provided needed evidence on a key issue, the regulations place the confidentiality necessary to ensure the success of alcoholism treatment programs above that need,19 and we must respect that decision.

A. Bergeron's claims.

Mass.Gen.L. ch. 176D, Sec. 3 prohibits certain unfair acts or practices in the business of insurance. Mass.Gen.L. ch. 93A provides a civil cause of action to persons injured as a result of an unfair act or practice, including those prohibited under ch. 176D, Sec. 3. Mr. Bergeron asserted a claim under ch. 93A contending that Connecticut Mutual had violated several subsections of ch. 176D, Sec. 3(9) in the handling of his insurance claim. The district court concluded that in connection with Mr. Bergeron's insurance claim, Connecticut Mutual had violated ch. 176D, Sec. 3(9)(g), which prohibits "[c]ompelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds".20 Connecticut Mutual now argues that the district court erred in its interpretation of Sec. 3(9)(g). According to Connecticut Mutual, an insurer does not violate Sec. 3(9)(g) if it compels an insured to institute litigation when, as here, liability was not reasonably clear.21

But even assuming that Sec. 3(9)(g) is not violated if the insurance company refuses to pay in the good faith belief that it has no liability,22 Connecticut Mutual's conduct does not measure up to this standard. Once it became apparent that Connecticut Mutual might invoke the suicide exclusion clause, Mr. Bergeron broached the topic of a possible settlement. But Mr. Bergeron was informed by Connecticut Mutual that its policy was not to settle claims "until after suit except for a small amount". Indeed, Connecticut Mutual did not make any settlement offer until trial,23 and then it offered only a fraction of what Mr. Bergeron recovered. The district court specifically found "uncontroverted evidence that Connecticut Mutual's failure to make a reasonable settlement offer was not a unique response to the particular circumstance of Mr. Whyte's death, but was rather consistent with Connecticut Mutual's standard claim settlement practice". In essence, the district court found that Connecticut Mutual's failure to make a reasonable offer was not predicated on a good faith determination that liability was not reasonably clear, and there is no indication that this finding of fact is clearly erroneous.24 Even assuming therefore that an insurance company does not violate Sec. 3(9)(g) if its reason for offering substantially less than the amount ultimately recovered is a good faith belief that liability is not reasonably clear,25 Connecticut Mutual's conduct was still in violation of Sec. 3(9)(g).

Connecticut Mutual next argues that even if it did violate Sec. 3(9)(g) with respect to the handling of Mr. Bergeron's claim, it was improper for the district court to award Mr. Bergeron damages of $25.00 and attorney's fees, because Mr. Bergeron did not prove that he was injured or adversely affected by the violation. We conclude, however, that the district court's award was proper. Chapter 93A, Sec. 9(3) specifically provides for recovery "in the amount of actual damages or twenty-five dollars, whichever is greater", and ch. 93A, Sec. 9(4) provides for the recovery of attorney's fees "in addition to other relief provided for by this section and irrespective of the amount in controversy". Therefore, it is clear that a plaintiff bringing an action under chs. 93A and 176D can recover $25.00 even if he can prove no damages,26 and that an award of attorney's fees to a prevailing plaintiff is also proper in these circumstances. Even if Mr. Bergeron must show that he was adversely affected before he can recover any damages or attorney's fees,27 there is no question that Mr. Bergeron was affected by Connecticut Mutual's violation of Sec. 3(9)(g). As a result of Connecticut Mutual's violation, he was required to undertake time consuming and costly litigation, the very burden that Sec. 3(9)(g) was enacted to eliminate.

B. Mrs. Whyte's claims.

On appeal, Mrs. Whyte contends that the district court erred in concluding that Connecticut Mutual had not committed an unfair claim settlement practice in its handling of her claim. Mrs. Whyte asserted that Connecticut Mutual had violated Mass.Gen.L. ch. 176D Sec. 3(9)(d)-(f).28 The district court found, however, that given the circumstances of Mr. Whyte's death, Connecticut Mutual had conducted a reasonable investigation and had denied coverage within a reasonable time. The district court also concluded that until the jury returned the verdict in favor of Mrs. Whyte and Mr. Bergeron on the contract claims, liability was not reasonably clear. Therefore, the court ruled that Connecticut Mutual had not violated Sec. 3(9)(d), (e), or (f).

Mrs. Whyte contends that the district court's ruling was based on an erroneous interpretation of law for two reasons: first, the district court did not take into account the extraordinarily high burden of proof an insurer faces when it seeks to invoke a suicide exclusion clause in Massachusetts; second, the court failed to recognize that Connecticut Mutual owed a higher duty to Mrs. Whyte because of the extensive estate planning rendered in connection with the sale of the policy. We conclude, however, that the district court committed no error in its disposition of Mrs. Whyte's ch. 176D claims.

Although it is true that an insurer faces a high burden of proof when it seeks to invoke a suicide exclusion clause,29 there is no reason to think that the district court did not consider this burden when it evaluated Mrs. Whyte's ch. 176D claims. Indeed, it is undisputed that the district court specifically included a discussion of this high burden in its instructions to the jury that considered the contract claims. Immediately after instructing the jury, the court considered Mrs. Whyte's ch. 176D claims. It is therefore reasonable to assume that the district court considered her ch. 176D claims in the light of the heavy burden an insurer seeking to invoke a suicide exclusion clause faces.

Mrs. Whyte also argues that Connecticut Mutual owed a higher duty to Mrs. Whyte while assessing her claim because of the extensive estate planning and financial consulting services it rendered along with the sale of the insurance policy. According to Mrs. Whyte, these additional services rendered Connecticut Mutual a fiduciary.

We must conclude, however, that in assessing her claim, Connecticut Mutual owed no fiduciary duty to Mrs. Whyte. She has not offered, and we have not found, any case in which an insurer was held to a higher duty with respect to its assessment of a claim as a result of estate planning services.30 Connecticut Mutual owed a duty to Mrs. Whyte to handle her claim candidly, fairly, promptly, and in good faith.31 The district court properly considered this duty when assessing Mrs. Whyte's ch. 176D claims.

Additionally, although not clearly articulated, Mrs. Whyte apparently contends that the district court erred as a matter of fact in concluding that Connecticut Mutual conducted a reasonable investigation, that Connecticut Mutual promptly denied coverage, and that liability did not become reasonably clear until the jury returned its verdict. She is asking this Court to review these issues de novo. We decline that invitation. The evidence supports the district court's findings; the findings are not erroneous.

Finally, Mrs. Whyte argues that if Connecticut Mutual violated Sec. 3(9)(g) in its handling of Mr. Bergeron's claim, that it also violated Sec. 3(9)(g) in its handling of her claim. Although this argument is superficially appealing, it is without merit for two reasons, both of which are related to the fact that Mrs. Whyte chose to follow a different tack from Mr. Bergeron in her dealings with Connecticut Mutual.32 First, unlike Mr. Bergeron, Mrs. Whyte failed to meet the demand letter requirement of ch. 93A. Chapter 93A, Sec. 9(3) requires that "[a]t least thirty days prior to the filing of any such action, a written demand for relief, identifying the claimant and reasonably describing the unfair or deceptive act or practice relied upon and the injury suffered, shall be mailed or delivered to any prospective respondent". Such a demand letter should specifically list the deceptive practices claimed.33 Mrs. Whyte's demand letter failed even to come close to meeting these requirements. Although her letter listed several violations and included copies of the relevant parts of the statutes with respect to those violations, the letter did not mention Sec. 3(9)(g). The letter therefore not only failed to list Sec. 3(9)(g), but by negative implication informed Connecticut Mutual that no such violation was being claimed.

The second reason Mrs. Whyte cannot recover under Sec. 3(9)(g) is found in the plain language of Sec. 3(9)(g), which prohibits "[c]ompelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds".34 It is clear, however, that Mrs. Whyte was not compelled to institute litigation as a result of any offer by Connecticut Mutual. Mr. Whyte died in March 1981. Mrs. Whyte submitted her proof of loss to Connecticut Mutual in April 1981. In May 1981, Connecticut Mutual advised her that it would be conducting an investigation--which eventually concluded in November 1981. Mrs. Whyte instituted litigation in September 1981, which was not only before Connecticut Mutual had informed her of its decision, but also before it had even made its decision.35 Given these circumstances, Mrs. Whyte can hardly claim that Connecticut Mutual compelled her to institute litigation by offering her a low settlement.

In contrast, Mr. Bergeron submitted his proof of loss in June 1981, but did not bring suit until October 1983--after having been informed both that Connecticut Mutual was invoking the suicide exclusion clause and that Connecticut Mutual's policy was not to settle claims until after suit except for a small amount. He sent Connecticut Mutual a proper demand letter identifying Sec. 3(9)(g) as a claimed unfair act.

We have considered all of the remaining contentions raised by Mrs. Whyte and Connecticut Mutual. We find them to be without merit.

The district court properly applied 42 C.F.R. Sec. 2.63 and limited the disclosure of the Beach Hill Hospital records to objective data only. The district court also properly concluded that Connecticut Mutual had violated Mass.Gen.L. chs. 93A and 176D, Sec. 3(9)(g) with respect to its handling of Mr. Bergeron's claim but had committed no violation of chs. 93A and 176D in its handling of Mrs. Whyte's claim. The decision of the district court is therefore affirmed.