Could you let us know the following?
1. Do you see this error for the same file every time?
2. Do you see this error for other jpg files?
3. Does this happen for video files?
4. Does this happen in the Quick Room or in the Expert Room?
5. Does this happen if you save the project (even if it is empty) and then import jpg?
6. I understand that you are trying to drag and drop it into Premiere Elements 11. Are you able to import it from within app (Add Media -> Files and Folders)?