diff --git a/compiler/testData/diagnostics/tests/inference/regressions/kt702.kt b/compiler/testData/diagnostics/tests/inference/regressions/kt702.kt
new file mode 100644
index 00000000000..e166ac1f352
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/regressions/kt702.kt
@@ -0,0 +1,20 @@
+package a
+//+JDK
+
+fun getJavaClass<T>() : java.lang.Class<T> { <!NO_RETURN_IN_FUNCTION_WITH_BLOCK_BODY!>}<!>
+
+public class Throwables() {
+    class object {
+        public fun propagateIfInstanceOf<X : Throwable?>(throwable : Throwable?, declaredType : Class<X?>?) : Unit {
+            if (((throwable != null) && declaredType?.isInstance(throwable).sure()))
+            {
+                throw declaredType?.cast(throwable)!!
+            }
+        }
+        public fun propagateIfPossible(throwable : Throwable?) : Unit {
+            propagateIfInstanceOf(throwable, getJavaClass<Error?>()) // Type inference failed: Mismatch while expanding constraints
+            propagateIfInstanceOf(throwable, getJavaClass<RuntimeException?>()) // Type inference failed: Mismatch while expanding constraints
+        }
+    }
+}
+