I have attempted to reproduce this issue using the Pega Academy environment and I have not been able to see the error you have mentioned while following the provided steps. I am able to reproduce the occurrence of the error you provided, but this requires deletion of the expense report case type after creating an instance.
Maybe someone form Pega Academy can provide more insight, in case there is a possible environment issue.
Possibly the casetype may be hidden in the application.
Click on the Application Name -> Open Application -> Cases & Data (tab) -> under CaseTypes Check the hidden case types, if not found add it manually. -> Save -> Logoff -> Login again.