It happens occasionally, seeds sprouting/growing into pod(s) inside a pod.

Peppers, unlike their tomato cousins in the nightshade family, did not evolve to include a seed sprouting inhibitor (contained in the jell like substance surrounding the seeds in tomatoes).

Bill

you see that from time to time, in bells, and habs. it seems to only happen in peppers with air space inside. I've never seen that in a serrano or tabasco. it is always cool to see though.