[ by Melanie Gretchen ] Bank of America shareholders opposing a proposed $20 million settlement by the bank's directors over the purchase of Merrill Lynch, criticized the payout as unfair, claiming that the shareholder payout represents 4% of directors' insurance coverage and is in violation of state law.  As they pursue their case in Delaware Chancery Court, U.S. District Judge Kevin Castel is considering whether to approve the settlement in a separate lawsuit, the success of which could affect the shareholders' case. The Numbers. Last week, a filing by shareholders in the Delaware case said the $20 million represents 4% of available insurance coverage – putting the coverage total at $500 million – and 0.4% of the $5 billion of damages incurred by the Charlotte, North Carolina-based bank.  In addition, they said the settlement violates Delaware law.  Both cases are derivative lawsuits brought on behalf of Bank of America, where payouts would go to the company rather than to shareholders. "The grossly inadequate proposed settlement is the result of a 'race to the bottom' that was carefully engineered by the individual defendants, willingly pursued by the New York derivative plaintiffs and their counsel -- and inexplicably fostered by the bank and its counsel," the Delaware filing said. Going Forward. For his part, Judge Castel has directed that parties in the New York case justify in writing the $20 million accord by May 4.  Following the takeover, which contributed to a 93% drop in its share price over 6 months, Bank of America was forced in January 2009 to get a second federal bailout.  As of Friday, shares closed down 2¢ at $8.25, which is 76% below where they traded before the merger was announced. The cases: (i) In re: Bank of America Corp Stockholder Derivative Litigation, Delaware Chancery Court, No. CA4307; and  (ii) In re: Bank of America Corp Securities, Derivative, and Employee Retirement Income Security Act (ERISA) Litigation, U.S. District Court, Southern District of New York, No. 09-md-02058. For further details, go to [Reuters, 4/27/12].