Resolved: An error occurred prior to this one that indicated file ALBUM.CONFIG could not be modified.  

Application tried to modify ALBUM.CONFIG but was not able to due to insufficient permissions. A message did initially appear indicating the condition.

Application successfully created the folder for the new category.

Upon subsequent requests to create a new category, the message (file already exists) appeared because a ALBUM.CONFIG did not contain updated data for the categories and the app tried to create a folder that already existed.

Bottom line: This error will occur if ALBUM.CONFING does not have a MODIFY permission. If the error does occur, change the permissions on the file and delete any folders corresponding to the categories that you tried to create (when the error occurred).