IN HIS BID TO BEcome the next Mr. Olympia, a contestant strapped a refrigerator to his back and ran around a race-track. Before he finished, the strap broke and the refrigerator injured him. He sued the strap maker, and a jury awarded him over $1 million, despite his rather unusual use of the product.

The rising tide of product-liability suits, including a few as outlandish as the strongman's, is a major cause of the current insurance crisis. The growing tendency of juries to side with consumers and award huge damages has strained insurers. The result: businesses face soaring premiums and canceled policies. "Any solution to the insurance problem will have to be based on a fundamental reform of tort law," says Robert Willmore, a U.S. deputy assistant attorney general. The Reagan Administration is pushing for changes in the tort system.

Congress is moving to end the crisis in what promises to be a bitter fight among some powerful lobbies. The aim is to impose federal standards on both insurance and product-liability law, or torts. Until now, both have been matters of state concern.

Past efforts at revising product-liability law aren't encouraging. In 1979, the Commerce Department peddled a model uniform product-liability act to the states, but most of them ignored it. And a bill imposing federal rules on the states died in a Senate committee last year. But Sen. John Danforth (R-Mo.) is expected to try again soon with a bill creating a system that enables claimants to settle directly with the company. They would give up the opportunity to collect anything for pain and suffering. In a major concession to business, the bill would eliminate "strict liability" provisions of tort law; companies would be liable only if they were negligent in making a product.

The insurance industry favors tort reform, but faces bitter opposition from trial lawyers, who share in the big awards. Consumer groups argue that the damages are necessary both to compensate victims and deter companies from making defective products.

Congress is also looking at ways to override state control of insurance, possibly through federal rates or guidelines. Even if no law is passed, says Sen. Jim Sasser (D-Tenn.), the debate "may be a shot across the bow of insurance companies to show them that they're being watched." Sasser has been holding hearings since November.