In this method, you resize the design on the front portion of the design template and then create an enlarged copy of the design file and blur it to use it as a background.
a. Resize the design to fit into the front portion of the phone case design template.
b. Right click on the layer and create a duplicate layer of the design. Shortcut is CTRL + J
c. Resize the bottom layer design to fill the complete canvas.
d. Apply Gaussian Blur. Select enlarged layer, and go to Filter > Blur > Gaussian Blur. Select the Blur radius according to how much you want to blur the image.
e. The design is now ready.