J.N.
Lice can happen to anybody. They are a big pest, but not really dangerous if you catch them quickly. Comb everyone's hair with a fine-toothed comb. Look under all the layers in the back (my daughter's hair is very thick and they were hiding back there really well). Don't feel like you need to wash their hair every day, lice prefer a clean scalp.
Pack away any pillows, cushions, stuffed animals your niece may have come into contact with. Put them in big plastic bags and seal them up for a week. Lice don't survive long without a host, so that sould do it (also, if you find lice do the same thing again).
I've heard that tea-tree oil is a natural way to fight off lice, so you may want to use that for a week or two (except on the baby). And don't forget to check your own hair too!
If you do get lice, the lice shampoo is really the most effective way to get rid of them. I would call the doctor to see if there is any specific thing to look for or avoid, and how to treat the baby. Only treat those who actually have the bugs, and follow the directions, especially the follow-up treatment a week later. Over use or not doing the follow up can lead to bugs that are more resistant to it. And you can always call your doctor for any questions.