Former U.S. attorney general Richard Kleindienst and two others, accused of involvement in a $1.7 million Arizona insurance case, have agreed to pay $150,000 to settle the civil lawsuit.

The settlement today came just as a civil trial against Kleindienst and the other two defendants was to start in Washington. The settlement, reached after negotiations with the Arizona attorney general and the state insurance department, became official with the approval of an Arizona judge tonight.

Arizona Insurance Director J. N. Trimble had accused Kleindienst and several others of conduct that caused Family Provider Insurance Co. to lose "not less than $1.75 million."

According to the complaint filed in U.S. District Court here, the loss resulted from the fraudulent transfer of $1.7 million of Family Provider assets to another company through an illegal dividend set-up.

The lawsuit sought $1.5 million in health and welfare payments from the Teamster Union Central States Fund supposedly diverted "improperly and unlawfully" from Family Provider by the defendants, plus $250,000 in legal fees paid to Kleindienst and Vincent B. Welch and Edward P. Morgan, former law partners of Kleindienst.

Welch and Morgan have already agreed to a $66,000 settlement.

The suit, filed initially in November 1977, concerned the activities of a California insurance promoter, Joseph Hauser. Hauser was indicted by a federal grand jury a year ago in connection with an insurance scheme involving pension funds in Arizona, Massachusetts, Florida and other places.

Kleindienst and Thomas Webb, a former aide to J. Edgar Hoover, aided Hauser in the "fraudulent and unlawful activity," according to the suit, Webb was the second party to the announced settlement.

Kleindienst allegedly took a $250,000 finder's fee from Hauser for helping obtain Teamster funds from union President Frank Fitzsimmons to use in Hauser's firms. Kleindienst allegedly split the fee among his partners, Welsh and Morgan, Webb and Irving Davidson, the third defendant in the settlement.

The lawsuit traces a complex series of transactions involving Family Provider's use of the Teamster funds. At one time, Trimble threatened to revoke Family Providers's insurance license.

In a court deposition, Kleindienst denied knowledge that the funds had been pledged as collateral in a separate deal with American Financial Corp.

Court papers, however, show a statement by Senate investigator Donald Gray that indicates a witness in the case, James Evans of American Financial, said Kleindienst knew of the "encumberance" of the funds as collateral. State prosecutors were preparing to take a statement from Evans.

Evidence that Kleindienst lied about the Family Provider matter could form the basis of a federal per-jury indictment, although officials say that is unlikely.

Kleindienst has not been charged with any criminal wrongdoing.

A former attorney general under President Nixon, Kleindienst pleaded guilty in 1974 to testifying inaccurately before a congressional hearing. Fitzsimmons and Kleindienst testified before a federal grand jury in Los Angeles about their actions with Hauser after they gave conflicting testimony to the Senate investigations subcommittee. Kleindienst had said he used his friendship with Fitzsimmons to assure Hauser of millions of dollars in Teamster pension contracts, while Fitzsimmons said he made no such assurances to Kleindienst.