diff --git a/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirHelpers.kt b/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirHelpers.kt
index 26320124afc..5a7dae1fab8 100644
--- a/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirHelpers.kt
+++ b/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirHelpers.kt
@@ -382,8 +382,10 @@ private fun lowerThanBound(context: ConeInferenceContext, argument: ConeKotlinTy
 fun FirMemberDeclaration.isInlineOnly(): Boolean = isInline && hasAnnotation(INLINE_ONLY_ANNOTATION_CLASS_ID)
 
 fun isSubtypeForTypeMismatch(context: ConeInferenceContext, subtype: ConeKotlinType, supertype: ConeKotlinType): Boolean {
-    return AbstractTypeChecker.isSubtypeOf(context, subtype, supertype)
-            || isSubtypeOfForFunctionalTypeReturningUnit(context.session.typeContext, subtype, supertype)
+    val subtypeFullyExpanded = subtype.fullyExpandedType(context.session)
+    val supertypeFullyExpanded = supertype.fullyExpandedType(context.session)
+    return AbstractTypeChecker.isSubtypeOf(context, subtypeFullyExpanded, supertypeFullyExpanded)
+            || isSubtypeOfForFunctionalTypeReturningUnit(context.session.typeContext, subtypeFullyExpanded, supertypeFullyExpanded)
 }
 
 private fun isSubtypeOfForFunctionalTypeReturningUnit(
diff --git a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/types/ConeTypeContext.kt b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/types/ConeTypeContext.kt
index dbe8bab5c8a..e7845098e68 100644
--- a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/types/ConeTypeContext.kt
+++ b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/types/ConeTypeContext.kt
@@ -85,7 +85,8 @@ interface ConeTypeContext : TypeSystemContext, TypeSystemOptimizationContext, Ty
 
     override fun KotlinTypeMarker.isError(): Boolean {
         assert(this is ConeKotlinType)
-        return this is ConeClassErrorType || this is ConeKotlinErrorType || this.typeConstructor().isError()
+        return this is ConeClassErrorType || this is ConeKotlinErrorType || this.typeConstructor().isError() ||
+                (this is ConeClassLikeType && this.lookupTag is ConeClassLikeErrorLookupTag)
     }
 
     override fun KotlinTypeMarker.isUninferredParameter(): Boolean {
diff --git a/compiler/testData/diagnostics/tests/generics/projectionsScope/unsafeVarianceInAliasedFunctionalType.fir.kt b/compiler/testData/diagnostics/tests/generics/projectionsScope/unsafeVarianceInAliasedFunctionalType.fir.kt
deleted file mode 100644
index ca0d9acc14c..00000000000
--- a/compiler/testData/diagnostics/tests/generics/projectionsScope/unsafeVarianceInAliasedFunctionalType.fir.kt
+++ /dev/null
@@ -1,11 +0,0 @@
-class Foo<out T>(val baz: Baz<T>)
-
-class Bar {
-    val foo: Foo<*> = TODO()
-
-    fun <T> bar(): Baz<T> {
-        return <!RETURN_TYPE_MISMATCH!>foo.baz<!>
-    }
-}
-
-typealias Baz<T> = (@UnsafeVariance T) -> Unit
diff --git a/compiler/testData/diagnostics/tests/generics/projectionsScope/unsafeVarianceInAliasedFunctionalType.kt b/compiler/testData/diagnostics/tests/generics/projectionsScope/unsafeVarianceInAliasedFunctionalType.kt
index 05ad642e149..708a7a96125 100644
--- a/compiler/testData/diagnostics/tests/generics/projectionsScope/unsafeVarianceInAliasedFunctionalType.kt
+++ b/compiler/testData/diagnostics/tests/generics/projectionsScope/unsafeVarianceInAliasedFunctionalType.kt
@@ -1,3 +1,4 @@
+// FIR_IDENTICAL
 class Foo<out T>(val baz: Baz<T>)
 
 class Bar {
diff --git a/compiler/testData/diagnostics/testsWithStdLib/java/functionN.fir.kt b/compiler/testData/diagnostics/testsWithStdLib/java/functionN.fir.kt
index 0d24f1a4e8a..6f3227c76ac 100644
--- a/compiler/testData/diagnostics/testsWithStdLib/java/functionN.fir.kt
+++ b/compiler/testData/diagnostics/testsWithStdLib/java/functionN.fir.kt
@@ -47,7 +47,7 @@ fun main() {
     a.baz(listOf())
 
     a.manyParams(null)
-    a.<!NONE_APPLICABLE!>manyParams<!>(any<kotlin.jvm.functions.FunctionN<Unit>>())
+    a.manyParams(any<kotlin.jvm.functions.FunctionN<Unit>>())
 
     // Potentially, this would have better to forbid calling manyParams, too.
     // But it might be complicated because we need to match that it is an override