I got the asbestos lining because it says immune to being set on fire. I then fought a bunch of "forged" raiders and saw my toon on fire. She took damage from their flamers too.

Bug, or deceptive wording?

Neither. Being set on fire is not the same as taking fire damage.

I did see fire on my toon while she was wearing that chest piece. She was on fire.

Did your character take damage or was it just the fire animation?

I hid around the corner while the fire continued upon my toon and her health bar was going down.

I am beginning to think this addition was decptively worded and will put something actually useful upon her armor.