A federal grand jury in Philadelphia yesterday indicted three top executives of a defunct insurance company for their roles in an alleged multi-state automobile insurance fraud totaling an estimated $100 million.

Government sources say that losses to other insurance companies, banks and investors, when finally tallied, will make it one of the biggest fraud cases in U.S. business history.

As pieced together from government and other sources, the Philadelphia insurance holding company, Fisco Inc., falsified computer entries to hide claims, deliberately overstated profits and virtually ignored the legal requirement to maintain reservces for insurance claims.

Stockholders reportedly lost about $10 million and banks some $20 million when Fisco failed. But in the end, the big losers will be casualty insurance policyholders in the states where Fisco did business.

The reason is that the claims of Fisco policyholders are being covered by their states' guarantee funds. These guarantee funds are underwriten by assessing the surviving insurance companies which, in turn, pass the costs along to their policyholders by boosting their premiums.

Knowledgeable sources estimate that the guarantee funds in New Jersey, Pennsylvania and Florida, along with 17 other states where Frisco did business, will lay out $70 million in claims.

Fisco never earned a cent - in fact, it lost millions of dollars, according to records. Yet Fisco's stock, which was traded over the counter, rose as high as $28 a share on fictitious profits.

William Rush, Fisco's president, was indicted. At one time, Rush claimed a profit of $35 million on his personal stack holdings, according to sources.

The Fisco fraud resembles the 1973 Equity Funding Corp. scandal in a number of respects, including the use of computers and the apparent willingness of low-level employes to follow the orders of superiors and falsify company books. None of these employes was indicted.

In comparing the two, law enforcement sources not that Equity Funding was the biggest criminal prosecution involving life insurance while they say Fisco is the biggest casualty insurance case.

The indictments charged the three defendants with mail fraud, obtaining fraudulent bank loans and conspiracy.

Besides Rush, 50, former used car salesman, those indicted were Robert Reilly, 53, a Fisco vice president, and Leonard Connolly, 57, a certified Public accountant who was Fisco's financial officer.

Last August, the Securities and Exchange Commission filed a civil complaint against the defendants as well as other Fisco officers charging them with securities fraud.

The criminal investigation was carried out by postal inspectors, with the help of an insurance industry investigative arm, the Insurance Crime Prevention Institute, in Westport, Conn. An attorney from the Justice Department's criminal frauds section presented the case to the grand jury.

Fisco insurance sales soared from $325,000 a year in 1967 to $57 million annually at the end of 1973. The sales were made through wholly owned agency subsidiaries mainly in Florida New Jersey and Pennsylvania.

The insurance sold was mostly expensive, high-risk auto insurance, much of it bought by drivers who could not get coverage elsewhere.

Under a contractual arrangement with two big insurance companies, Fisco agencies wrote the policies, then submitted all the premiums to the companies.

The companies - Central National Insurance Co. of Omaha and Summit Insurance Co. of New York - deduted their guaranteed profit of 5 percent to 15 percent, their expenses and any losses. The balance was sent back to the Fisco agencies, which were supposed to set up reserves for future losses.

According to various sources, only minimal reserves were set aside to cover any losses on the extremely risky business. For accounting purposes, reserves are charged against profits so, without any reserves, the agents were free to collect huge commissions on their sales and Fisco was able to show big profits.

Beginning in 1970, "employes became aware that management did not wish adequate reserves and that attempts to set adequate reserves would have adverse effects on their careers," the SEC suit charged.

In 1971, when Summit did an audit and found Fisco owed it $4 million, Summit and the other insurer bowed out. So Fisco switched the business to its own company, called Gateway Insurance Co.

Meanwhile, Fisco had "gone public" and with investors attracted by its impressive "sales," the price of the stock quickly tripled from the initial %10 per share offering price.

Rush and other insiders paid only pennies for their stock, which they allegedly pledged for $10 million in bank loans.

On Jan. 5, 1973, Rush ordered employes to erase from Fisco's computer system some $800,000 in claims reserves, according to court documents. This boosted Fisco's net income for 1972 by $800,000. Among Fisco employes, Jan 5 became known as "Black Friday."

Finally, with state insurance regulators and its own auditor applying pressure, Fisco suddenly admitted in June 1974 that it lost about $39 million in 1973. Two months later, the Pennsylvania Insurance Commission declared Gateway insolvent.