Hello,
I’d double-check the Static Mesh, (Open Static Mesh itself in the content browser) to see if the Material is broken in there.
If you’re seeing that gray checker pattern in the mesh-viewer, then you’d need to open the Material to see what’s broken.
If it looks textured/normal when viewing the static mesh, I’d be curious to see if the Material has anything complex in it that might break when used as an instanced static mesh in foliage mode.