I am using a MOV for relay contact protection. I am switching a pump of current 12A @230V using relay. But I faced contact arcing problem so I added a MOV. I followed this guide for MOV selection as I am using their relays. But I found some strange effect of adding MOV. The pump won't start if MOV is added across relay contacts. Without MOV pump starts. I am using MOV of Elpro with rating of 440/20.
You don't give much information about the transil nor the MOV, but it sounds like the stored energy in cable inductance is just too high for the MOV and transil to absorb. If there appeares to be a short when you insert your MOV, the most likely reason is that the MOV is shorted. They do fail into short when overpowered so it makes sense.
If you have selected the voltage rating on the MOV to an appropriate value, you just need to increase the energy rating or use several in parallel. The first option is better.