Subrogation is the right of an insurance carrier, after paying a claim to its insured, to step into the insured's shoes and pursue recovery from the third party that actually caused the loss. A waiver of subrogation eliminates that right against specific named parties. In construction contracts, mutual waivers of subrogation between owner, GC, and subcontractors are standard. The waivers prevent each party's insurer from suing another contracting party after a covered loss, even if that party's negligence caused the loss.
The purpose: keep losses inside the insurance system rather than triggering cross-claims between contracting parties that destroy working relationships and balloon legal cost. Both the contract clause and the actual policy endorsement (often ISO CG 24 04) must be in place; a contractual waiver without a corresponding policy endorsement leaves the carrier free to subrogate. Builder's risk policies almost always include a waiver of subrogation against named parties as a standard endorsement. Verify the actual endorsement, not just the contract clause.