Rename changed substantially in the past couple of versions. And I don't recall how it used to behave wrt renaming a file to a file that exists in MC.
MC now handles more bundled files when a single MC entry is renamed (artwork, sidecar files, etc.).
I believe MC calls out to Explorer to perform the move, so overwrites are detected at the Explorer level. It may be that when a file exists in MC, it can just rename that file uniquely by asking Explorer to use a safe rename (adds prefix), and then MC can use the new you're asking for.
Bug alert ahead...
When I rename over an existing file (not in the MC library), I get a confirmation dialog asking about overwriting. Its the standard Explorer confirmation asking to Replace, Don't Replace, or Copy. I've found that if I deny overwriting, MC has already moved sidecar and artwork files, so has broken the "atomicity" of a library entry (hence losing cover art, sidecar data). This seems a bug.