How does the bitcoin network recover in case of a hash collision in the block hash?
It would not break the algorithm. 

As the inventory vector of the described new block would be a duplicate of an already known block, no other node would request this block. It would just be ignored, as if never discovered in the first place. Everybody else would still be hashing away happily, obsoleting the block eventually.

Tough luck for the miner, he'd not get the reward, because everybody would be convinced that no new block has been found at that height yet.

Of course, chances of that happening are negligible, because the block hash is a random 256 bit output (smaller than the current target), which allows for an immense number of possible hash outputs of a similar magnitude as the address space.

Actually, @NickODell made me aware that it can cause a problem, when nodes see the newer block before the older block that was already part of the longest chain. In that case the node would be unable to synchronize, as it would not be able to build the complete chain.