In my case there is custom filesystem API implementation, that declares its paths as local (filesystem::is_remote() returns false).
Somehow during the external art finding process, a directory of the track location may be get opened as a file for read. In my case everything is a file, so filesystem::open(open_mode_read) does return a file, instead of throwing exception_io_not_found(). And the problem is, if there are no other album art candidates, art loader ends up with a text "Unsupported format or corrupted file".
Note, it seems an opening directory as a file happens only if 'Search patters' (Preferences -> Display -> Album Art -> Front Cover) is empty, or contains an empty line, or contains commented out line (thanks @WilB for initial research). So my hope is that this is not expected behavior and was just overlooked, since overall scenario is quite exotic.