I think this is another example of the "persistant name" code, in which case it is WAD. If you separate just the leader from the stack, then merge the units into that leader, then create the division, you should get the correct new name. That's how it works now, and likely will for the rest of time...

I'm playing as USA against the AI.

I noticed after I was able to create divisions in 1.16 that sometimes the division's name didn't change to "division xx" rather it remained under the commander's name. Is this WAD or a potential bug?