The equation is not correct as stated, but needs to be interpreted in the variational sense when multiplied by a test function. To this end, consider the operator
$$
L(\phi) = |\nabla \phi|^2.
$$
Here, $\phi=\phi(x)$ is a function. Now, imagine what its derivative would be. Derivatives of operators are most commonly considered in certain directions $v(x)$. So we could denote
$$
L'(\phi)(v) = \lim_{\varepsilon\rightarrow 0} \frac{L(\phi+\varepsilon v)-L(\phi)}{\varepsilon}.
$$
If you go through the motions with the limit, you will find that
$$
L'(\phi)(v) = 2 \nabla \phi \cdot \nabla v.
$$
If you wanted to, you could then define the derivative of the operator, $L'(\phi)$ (or, in your notation, $\frac{\partial}{\partial\phi}L(\phi)$ as
$$
L'(\phi) = 2 \nabla \phi \cdot \nabla
$$
which is an operator that acts on whatever it is applied to.
You can extend this. Assume that the functions $\phi$ you consider live on a domain $\Omega\subset {\mathbb R}^d$ and that $\phi|_{\partial\Omega}=0$. (In other words, you assume that $\phi \in H^1_0(\Omega)$.) If you define a functional
$$
J(\phi) = \int_\Omega L(\phi) = \int_\Omega |\nabla \phi|^2
$$
that associates a number to every function $\phi$, then you can again ask what the derivative of $J$ is in a direction $v$. You get
$$
J'(\phi)(v) = \int_\Omega L'(\phi)(v) = \int_\Omega 2\nabla \phi \cdot \nabla v.
$$
You can integrate the last formula by parts, using that both $\phi$ and $v$ are zero on the boundary, to get
$$
J'(\phi)(v) = \int_\Omega\left[ -2\nabla \cdot \nabla \phi\right] v.
$$
It is in this context that the term you cited in the question appears. But the formula you cite is, by itself, wrong.