I always read it as an "in the place of" rather than as "in addition to," although as it's written I suppose it's a little ambiguous. Given how the Harm rules work, the difference between +2 Armor (instead) and +3 Armor (in addition) is pretty huge. Given that your standard Hardholder gang is already medium with 1-armor, that +3 would make you largely impervious to assaults by a large gang dealing 3-harm (your total armor would be 4, exactly what they'd be inflicting being a size category bigger than you). That's pretty potent, but maybe that's the intent.