Null Values in a CASE statement
Why this happens has already been answered by @PaulWhite in the SO question: How does this CASE expression reach the ELSE clause?

To solve it, you should calculate the ABS(CHECKSUM(NEWID()))%10 +1 outside/before the INSERT statement so it is calculated once. Something like:

DECLARE @i INT = 1 ;
DECLARE @rand INT ;
 WHILE @i &lt;= 10
   BEGIN
    SET @rand = ABS(CHECKSUM(NEWID()))%10 +1 ;
    INSERT INTO TestEmployeeCountry 
    VALUES ( SUBSTRING('ABCDEFGHIJKLMNOP', @i, 1), 
        CASE @rand
            WHEN 1 THEN 'USA'
            WHEN 2 THEN 'CANADA'
            WHEN 3 THEN 'MEXICO'
            WHEN 4 THEN 'UK'
            WHEN 5 THEN 'FRANCE'
            WHEN 6 THEN 'SPAIN'
            WHEN 7 THEN 'RUSSIA'
            WHEN 8 THEN 'CHINA'
            WHEN 9 THEN 'JAPAN'
            WHEN 10 THEN 'INDIA'
        END) ;
    SET @i = @i + 1 ;
   END ;


Also notice that with your code, the 10 countries will not be placed in the table with equal probability! The first country (USA) will have 10% chance, the second will have 9% ( (100%-10%)*10% ), the third 8.1%, ((100%-19%)*10%), etc. That leaves a not so small chance (around 1/e) that none of the 10 is chosen and the CASE expression goes to the default ELSE NULL and you get the error. (You can check the probabilities if you allow nulls in the column and run the SQLfiddle script.)

According to the above, another way to solve it would be to change the expressions to comply with how SQL-Server executes the CASE and all 10 cases have the same probability:

    CASE 0
        WHEN ABS(CHECKSUM(NEWID()))%10 THEN 'USA'
        WHEN ABS(CHECKSUM(NEWID()))%9 THEN 'CANADA'
        WHEN ABS(CHECKSUM(NEWID()))%8 THEN 'MEXICO'
        WHEN ABS(CHECKSUM(NEWID()))%7 THEN 'UK'
        WHEN ABS(CHECKSUM(NEWID()))%6 THEN 'FRANCE'
        WHEN ABS(CHECKSUM(NEWID()))%5 THEN 'SPAIN'
        WHEN ABS(CHECKSUM(NEWID()))%4 THEN 'RUSSIA'
        WHEN ABS(CHECKSUM(NEWID()))%3 THEN 'CHINA'
        WHEN ABS(CHECKSUM(NEWID()))%2 THEN 'JAPAN'
        ELSE 'INDIA'
    END