You should see Daedric Protection on your sheet, your health regen will go up. If you're not seeing a difference, then it doesn't work with bound armor. It does work with atronach though, which is a great ultimate.
My assumption is that it does not, when I equip summon atronach, my health regen literally goes up on my character sheet. I use bound armor as well, but I also use atronach. When I get home tomorrow I can check if bound armor gives me regen without atronach equipped.
This passive is completely non-functional at the moment. No ability actually makes it do what it is supposed to do.
But, as we all know, there are no bugs in ESO.
Lol..OK. Essentially free health regen is crap.
Good news, everyone! I think I perfected a plague that will destroy all life on Azeroth!