Legendary Miss Fixit
It depends on which way it was coded; we have some equipment coded each way.
This one is multiplying the two damage bonuses together.
It's actually an interesting question as to which is "right". You see, to exactly compensate for the BtH, it should be adding the BtH modifiers together before applying the difference; however, using a weapon and an armor multiplies the two damage corrections instead. This will be very close, and is considered acceptable.
A Special is, in some sense, based on weapon + assumed armor, so it's somewhat debatable as to which is "correct".
Personally, my take at the moment is that totaling it is "better" but that either is quite acceptable - and neither is a bug.