Wrong instance selection with overlapping instance in a superclass

test_foo and test_bar should have the same type, but it seems like the non-{#- OVERLAPPING #-} instance is chosen prematurely.

{-# LANGUAGE NoMonomorphismRestriction, FlexibleContexts, FlexibleInstances #-}
module Bug where

class A a where
class A a => B a where

data Foo s a
instance {-# OVERLAPPING #-} A (Foo Int Bool)
instance A (Foo s a)
instance B (Foo s a)

helper :: Foo s Bool -> s -> Int
helper = undefined

foo :: (A a, B a) => a
foo = undefined

bar :: B a => a
bar = undefined

{-
  *Bug> :t test_foo 
  test_foo :: A (Foo s Bool) => s -> Int
-}
test_foo = helper foo

{-
  *Bug> :t test_bar
  test_bar :: s -> Int
-}
test_bar = helper bar

Compare with 7.10.3:

*Bug> :t test_foo
test_foo :: A (Foo s Bool) => s -> Int
*Bug> :t test_bar
test_bar :: A (Foo s Bool) => s -> Int