It’s not great that Neovim destroyed/replaced files that aren’t clearly under its purview. They should have probably also made the consideration that a lot of Neovim users are going to be migrating from Vim.
Maybe if they’re making their own persistent undo standard, use different file naming conventions.
That said, as a fork of Vim, maybe the Neovim authors are at least partially reasonable in assuming that you’re not running multiple forks of Vim that could then potentially conflict with each other. It just sucks that they never really thought of a migration path for this particular feature.