Current generation of autopilots doesn't handle traffic avoidance or make any routing decisions - they just follow pre-programmed routes at pre-programmed speed and altitude (or climb/descent profile).

But even this relatively simple level of automation causes problems - pilots start to rely on automation too much, and when things go south they are not capable to deal with it.

Airlines recognize it, and put more emphasis on hand-flying during training and routine operations, so pilots don't lose their basic piloting skills.

It's not a new problem - there is an excellent training video from 1997 - "Children of the Magenta": https://www.youtube.com/watch?v=pN41LvuSz10

There are many conditions unders which an aircraft autopilot will simply disconnect without previous warning and hand over controls to the pilot.