The TIN Builder dialog box may suggest an output location that happens to be a coverage. This can occur if the last browse location used when adding data to a document was a coverage. Triangulated irregular networks (TINs) should not be placed inside coverage folders.
This is a known issue.
Solution or Workaround
Be sure to check the default output location and make sure it's not a coverage. If the TIN has already been created inside the coverage, you can safely move its folder up and out of the coverage's folder by using the operating system's File Explorer Cut and Paste capability.