8-K

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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K
                                 CURRENT REPORT

                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                                 Date of Report
                                  July 3, 2006
                        (Date of earliest event reported)

                           VESTA INSURANCE GROUP, INC.
             (Exact name of registrant as specified in its charter)

                  Delaware                                63-1097283
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                 Identification No.)

              3760 River Run Drive                           35243
              Birmingham, Alabama                          (Zip Code)
   (Address of principal executive offices)

                                 (205) 970-7000
              (Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

[ ]  Written communications pursuant to Rule 425 under the Securities
     Act (17 CFR 230.425)

[ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange
     Act (17 CFR 240.14a-12)

[ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

[ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))

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7.01 REGULATION FD DISCLOSURE

On July 3, 2006, the Registrant issued the press release attached hereto as
Exhibit 99.1 and incorporated herein by reference.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

      (d)   Attached hereto as Exhibit 99.1 is a copy of Vesta Insurance Group's
            press release.



                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.

Dated as of July 3, 2006.

                                 VESTA INSURANCE GROUP, INC.


                                 By:  /s/ John McCullough
                                      ------------------------------------------
                                 Its: Vice President - Associate General Counsel

EX-99.1

                                                                    Exhibit 99.1

                  VESTA SUBSIDIARIES PLACED INTO REHABILITATION

    BIRMINGHAM, Ala., July 3 /PRNewswire-FirstCall/ -- Vesta Insurance Group,
Inc. (Other OTC: VTAI.PK) announced that the following six insurance
subsidiaries of Vesta Insurance Group, Inc. agreed to be placed into court-
ordered rehabilitation in Texas:

     - Vesta Fire Insurance Corporation;
     - Vesta Insurance Corporation;
     - Shelby Insurance Company;
     - Shelby Casualty Insurance Corporation;
     - Texas Select Lloyds Insurance Company; and
     - Select Insurance Services, Inc. (attorney in fact for Texas Select
       Lloyds).

    The District Court of Travis County, Texas subsequently entered the Agreed
Order of Rehabilitation and Permanent Injunction, appointing the Texas
Commissioner of Insurance as Rehabilitator.

    At this time, policies are still in force, coverage remains in place, the
insurance subsidiaries continue to issue new and renewal policies, process and
pay claims, and pay agent commissions in the normal course.

    Pursuant to Chapter 21A of the Texas Insurance Code, title to the assets of
these companies is now vested by operation of law in the Rehabilitator.

    As previously disclosed, Vesta Insurance Group, Inc. had been pursuing
several possible transactions to improve the financial condition of these
subsidiaries, including a possible sale of certain subsidiaries, but was unable
to enter into a definitive agreement. The Rehabilitator is in the process of
developing a plan of rehabilitation for the affected companies, which includes
the sale of certain of the insurance subsidiaries.

    Florida Select Insurance Company and Hawaiian Insurance & Guaranty, Ltd.
have consented to the entry of similar orders in the appropriate courts in
Florida and Hawaii.

    Vesta Insurance Group, Inc. believes that entry of these orders of
rehabilitation constitutes a default under the terms of the Group's Indenture
with respect to its existing long term debt securities. Such default does not
affect the ability of the Rehabilitator to close a sales transaction.

    About Vesta Insurance Group, Inc.

    Vesta, headquartered in Birmingham, Ala., is a holding company for a group
of insurance companies that primarily offer property insurance in targeted
states.

SOURCE  Vesta Insurance Group, Inc.
    -0-                             07/03/2006
    /CONTACT:  John W. McCullough, Vice President - Associate General Counsel
of Vesta Insurance Group, Inc., +1-205-970-7056, or Jmccullough@vesta.com/
    /Web site:  http://www.vesta.com/
    (VTAI)