So far my only trouble is when the relay is closed (working) and if I manually switch off one of the devices I get an instant error and arduino freezes.
Ahh, while any relay is energized, it essentially shorts out the snubber and MOV. When the relay contacts open, the snubber and MOV do their job and protect the relay and reduce arcing/EMI. However, if there's a manual switch connected in series and its opened while the relay is energized, there's no filtering or protection.
If you could connect the manual switch like this, then all contacts would be protected:
