Should be on when loading/unloading or using the camper. But if you want to verify which position is correct.
Disconnect the shore power and turn on the overhead lights. Flip the disconnect until the lights come back on (Most likely the ON position) From now on leave the switch in that position when loading up and when camping regardless of whether or not you have hookups. Once you are done and it is back in storage flip the switch the other way to disconnect the batteries.
When the refrigerator warmed up with no shore power it's because your refrigerator needs 12v for the electronics even if you are running it on propane. So as I said above, leave the batteries connected when you are using the RV.
Last thing. Be aware that with no shore power and everything turned off in the RV; If the batteries are connected your batteries will still drain in about 1-2 weeks due to vampiric loads like the LP detector. That is why you need to use the disconnect switch in storage.