Problem: Create TIN dialog default output location might incorrectly point inside an ArcInfo coverage
If the last browse location for getting or saving data in ArcScene, or ArcMap, was a coverage, the Create TIN From Features dialog box will provide a default output TIN location that is inside the coverage folder.
This is a known issue.
Solution or Workaround
Check the default output path of the dialog to ensure it is an appropriate location for the resulting TIN.